Commercial Law Unit 5 Cases and Materials

Peekay Intermark Limited, Harish Pawani v Australia and New Zealand Banking Group Limited [ !!"# $%&A &iv '("
Judgment Lord Justice Moore-Bick: 1. This is an appeal against the order of Mr. Richard Siberry .!.

sitting as a "eputy Judge of the !o##ercial !ourt gi$ing %udg#ent for the first clai#ant& 'eekay (nter#ark Li#ited )*'eekay+, against the defendant& -ustralia and .e/ 0ealand Banking 1roup Li#ited )*-.0+ 1345 . 2. 'eekay is a co#pany incorporated in the (sle of Man /hich has a branch in 6## -l i/ain in the 6nited -rab 7#irates and trades fro# an address in "ubai. (t is used as an in$est#ent $ehicle by its shareholders /ho include the second clai#ant& Mr. 'a/ani. The co#pany trades in a $ariety of in$est#ents including bonds& bills& e#erging #arket instru#ents and deri$ati$es& as /ell as bullion and currencies. (n$est#ent decisions are taken by Mr. 'a/ani and his fello/ directors. The %udge found that Mr. 'a/ani is a #an of substantial #eans /ho has considerable in$est#ent e8perience. 9e began in$esting in e#erging #arket instru#ents /ith -.0 in 1334. :. -.0 is the ulti#ate parent of the $arious subsidiary co#panies /hich #ake up the group. -t the ti#e of the e$ents /ith /hich this appeal is concerned it operated an in$est#ent banking di$ision or *the bank+,& on its clai# for da#ages for #isrepresentation under section 2)1, of the Misrepresentation -ct

under the na#e ;-.0 (n$est#ent Bank< fro# offices in the !ity of London. -.0 (n$est#ent Bank /as itself #ade up of a nu#ber of separate depart#ents& each of /hich /as treated for ad#inistrati$e purposes as ha$ing a separate account /ithin the bank. =. -.0 itself and other co#panies /ithin the group carried on a pri$ate banking business under the na#e ;1rindlays 'ri$ate Banking< )*1B'+,. >ne of those co#panies& -.0 1rindlays Bank Ltd )*-.0-1BL+,& had a branch in "ubai. Mrs. Ran%ita Balasubra#ania# /as a Regional Manager of 1'B e#ployed by -.0-1BL. She /as based in "ubai but reported to 1B' in London. Mr. 'a/ani began #aking in$est#ents on behalf of 'eekay through -.0 so#eti#e in 133?. -bout a year later he #et Mrs. Balasubra#ania# and thereafter regularly in$ested in e#erging #arket instru#ents /ith -.0 through her& or occasionally through a Mr. @ood /ho /as e#ployed in the 1eneral Sales Tea# of -.0 (n$est#ent Bank dealing /ith e#erging #arkets. Russia /as one of the e#erging #arkets in /hich Mr. 'a/ani in$ested during that period. ?. Throughout 1335 and the early part of 133A the Russian go$ern#ent issued a series of bonds kno/n as 1osudarst$enniye Bratkosrochniye Beskuponniye >bligatsio )*1B>+,. These /ere short-ter# non-interest-bearing bonds deno#inated in roubles /hich /ere Cuoted at a discount to face $alue. The right to hold 1B>s /as li#ited to 21 Russian banks and one /estern bank& !redit Suisse Dirst Boston )*!redit Suisse+,. "uring the latter part of 1335 and the early part of 133A 1B>s /ere traded at a substantial discount to their face $alue and therefore represented an interesting in$est#ent opportunity& albeit one /hich carried a substantial le$el of risk. (n response to an initiati$e on the part of !redit Suisse in the latter part of 1335 the Structured 'roducts 1roup /ithin -.0 (n$est#ent Bank de$eloped an in$est#ent product described as a ;structured 6S "ollar hedged Russian Treasury bill deposit<. The

product /as structured as a dollar deposit /ith -.0 /ith repay#ent linked to the perfor#ance of a reference obligation in the for# of a 1B> /ith a specified #aturity date. The risk of depreciation of the rouble /as to be hedged by -.0 by #eans of a for/ard contract /ith a #a%or Russian bank for the purchase of 6S dollars. The rate of return to the in$estor /ould be represented by the discount to face $alue at /hich the 1B> /as traded at the ti#e of the in$est#ent less the cost of the hedge. The #ain risks to /hich the in$estor /ould be e8posed /ere a default on the part of the Russian !entral Bank in #aking pay#ent of the 1B> at #aturity and a default on the part of the bank /ith /hich the hedge contract had been placed. -.0 also produced a proposal for a si#ilar tradable for# of this in$est#ent structured as a note& the #ain details of /hich /ere set out in an (ndicati$e Ter# Sheet produced by 1'B for the purposes of generating interest a#ong potential in$estors. 4. -t so#e ti#e in January 133A Mr. -ggar/al of 1'B in London told Mrs. Balasubra#ania# that an opportunity had arisen for the bankEs clients to in$est in 1B>s /ith a 6S dollar hedge. 9e sent her a copy of the (ndicati$e Ter# Sheet /hich described the product as *a high yield note linked to Russian bonds hedged into 6S dollars offering a return eCui$alent to 14F15G per annu#+. The ter# sheet dre/ attention to the fact that the in$estor took $arious risks in relation to the 1B> and the currency contract& including so$ereign default by the Russian go$ern#ent& in /hich case the principal could be at risk. (n the light of /hat she had been told by Mr. -ggar/al Mrs. Balasubra#ania# spoke by telephone to Mr. 'a/ani on at least t/o occasions on 1st and 2nd Debruary 133A to see if he /ould be interested in in$esting in the proposed 1B>-linked deposit. -t so#e point during their discussions she also sent hi# a copy of the (ndicati$e Ter# Sheet describing the proposed 1B>linked note. 9o/e$er& the %udge found that she did not tell hi# that

the product he /as being offered /as a structured deposit linked to a 1B> or that in the e$ent of so$ereign default in$estors /ould ha$e no control o$er the #anner in /hich the in$est#ent /as liCuidated because that /as not ho/ she understood the position. 5. -s a result of their discussions Mr. 'a/ani acting on behalf of 'eekay told Mrs. Balasubra#ania# that he /ished to in$est 6SH2?I&III in the product she had described to hi#& that is& the 1B>-linked deposit. 9o/e$er& no binding contract ca#e into e8istence at that stage since Mr. 'a/ani had not recei$ed any detailed ter#s of the proposed in$est#ent and did not therefore ha$e sufficient infor#ation to enable hi# to place an order of any kind. - docu#ent containing /hat /ere described as final ter#s and conditions )*DT!s+, relating to a hedged Russian Treasury bill /as sent to Mrs. Balasubra#ania# fro# London on 2nd Debruary as an attach#ent to an e-#ail. They described the in$est#ent as a deposit and set out $arious ter#s relating to it& including the #aturity date and the pro%ected rate of return. (n the ordinary /ay she /ould ha$e opened the e-#ail /hen she ca#e into the office the ne8t day& but because she /as occupied /ith other #atters she did not do so until =th Debruary. The %udge found that& ha$ing opened the e-#ail& Mrs. Balasubra#ania# printed off the docu#ents attached to the e-#ail but did not read the# in any detail because she assu#ed that if there had been any significant difference bet/een the in$est#ent to /hich they related and the product that had pre$iously been described to her& that /ould ha$e been dra/n to her attention. A. The DT!s the#sel$es /ere acco#panied by a docu#ent described as an ;7#erging Markets Risk "isclosure State#ent< /hich /as to be signed by the client and returned to the bank together /ith its instructions to proceed /ith the in$est#ent. >n =th Debruary Mrs. Balasubra#ania# sent copies of all the

docu#ents by fa8 to Mr. 'a/ani for signature on behalf of 'eekay and a draft letter of instruction to the bank to transfer the funds needed to #ake the in$est#ent. Mr. 'a/ani kne/ fro# his pre$ious dealings /ith -.0 that it /ould be necessary to sign a docu#ent of this kind& but apparently he regarded it as a #ere for#ality. The %udge found that he looked o$er the docu#ents briefly but did not read the#& assu#ing that they reflected /hat Mrs. Balasubra#ania# had told hi# about the in$est#ent. 9e did notice that the DT!s /ere headed *6S" 9edged Russian Treasury Bill+& but he regarded that as consistent /ith the description of the product that she had gi$en hi#. Together /ith one of 'eekayEs e#ployees he initialled each page of the docu#ents and signed the Risk "isclosure State#ent /hich he returned to the bank under co$er of a letter dated 5th Debruary 133A to /hich ( shall refer in a #o#ent. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 1:. The final page of the DT!s contained /hat /as described in the heading as an ;(#portant .otice< in the follo/ing ter#s: JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ Before considering entering into this transaction you #ust #ake your o/n independent assess#ent as to /hether it is appropriate for you based upon your o/n %udg#ent and upon ad$ice fro# such ad$isors as you consider necessary. -.0 Bank is not acting as your financial ad$isor or in a fiduciary capacity in relation to this transaction. (t is an e8press ter# that you #ay enter into /ith -.0 Bank that you are not relying on any co##unication )/ritten or oral, #ade by -.0 Bank as constituting either in$est#ent ad$ice or a reco##endation to enter into this transaction. K 'otential in$estors should refrain fro# entering into a transaction of the type described herein unless they fully understand their

ter#s and risks& including the e8tent of their potential risk of loss and ha$e independently deter#ined that a transaction of this nature is appropriate for the#.+ 1=. The Risk "isclosure State#ent ran to o$er fi$e pages. (t contained detailed /arnings to in$estors of the risks associated /ith $arious kinds of in$est#ents in e#erging #arkets including deri$ati$es in the for# of structured notes and other debt instru#ents. The penulti#ate page contained the follo/ing /arning in capital letters: *Before #aking any in$est#ent in an e#erging #arkets instru#ent& you should independently satisfy yourself that you understand and appreciate the significance of the rele$ant risks& and that such an in$est#ent is appropriate and suitable for you or your #anaged accounts in light of your ob%ecti$es& e8perience& financial and operational resources& and other rele$ant circu#stances. Lou should also ensure that you fully understand the nature of the transaction and contractual relationship into /hich you are entering and the nature and e8tent of your e8posure to risk of loss& /hich #ay significantly e8ceed the a#ount of any initial pay#ent by or to you. The issuer assu#es that the custo#er is a/are of the risks and practices described herein& and that prior to each transaction the custo#er has deter#ined that such transaction is suitable for hi#.+ 1? (##ediately abo$e the space pro$ided for the clientEs signature there appeared the follo/ing: *M!lientN confir#s it has read and understood the ter#s of the 7#erging Markets Risk "isclosure State#ent as set out abo$e.+ 14 Mr. 'a/ani returned the DT!s and the Risk "isclosure State#ent signed on behalf of 'eekay under co$er of a letter dated 5th Debruary 2II? /hich& apart fro# the instructions to transfer $arious

a#ounts fro# other accounts to that of 'eekay& follo/ed Cuite closely the draft pro$ided by Mrs. Balasubra#ania#& sa$e that he added at the end of the last line the /ords *as per the attached docu#ent.+ -s a result the letter read as follo/s: *Lou /ill recei$e 6SH2=?&2?IO- fro# -.0 (n$est#ent Bank& Miner$a 9ouse for credit to our abo$e #entioned account. 'lease add all a#ounts in the call accounts of 9arish 'a/ani POor 'reeti 'a/ani $iQ 6SH12&5:?.24& 6SH1&2?IO- and 6SH25?O- and transfer the sa#e to the call account of 'eekay (nter#ark Li#ited. total of 6SH2?I&IIIO- should be utilised to buy the Russian 9edged 1B> .ote as per the attached docu#ent.+ The reference to the attached docu#ent can only ha$e been a reference to the DT!s and Risk "isclosure State#ent. (n accordance /ith those instructions -.0 debited 'eekayEs account in order to fund a share in the 1B>-linked deposit described in the DT!s. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 13 (n -ugust 133A the Russian go$ern#ent announced a

#oratoriu# on certain of its debt obligations& including those arising under 1B>s& and as a result 1B> .o. 2111I to /hich 'eekayEs deposit /as linked /as not paid on its #aturity date. The obligation /as $irtually /orthless. -.0 i#ple#ented the default procedure set out in -ppendi8 2 of the DT!s and as a result the a#ount reco$ered by 'eekay on the #aturity of its in$est#ent /as 6SH?&31A.I4. (t is not suggested that the default procedure /as operated in any /ay i#properly. The loss in that /ay of substantially the /hole of its in$est#ent ga$e rise to a dispute bet/een 'eekay and -.0 /hich cul#inated in these proceedings. 2I The essential grounds of 'eekayEs clai# are to be found in paragraphs 3& 15 and 1A of its a#ended particulars of clai# /hich

read as follo/s: *3. >n the 1st or 2nd Debruary 133A Mr. 'a/ani /as telephoned by Mrs. Balasubra#ania# and she infor#ed hi# K that: )a, the Bank had a product /hich /as being #arketed& a 6SH2# Russian *hedged treasury bill note+ kno/n as a *9edged 1B>+ )*the .ote+,R )b, the .ote co#prised a deposit structured note by /hich Russian roubles /ere hedged by a strong bank& the (nternational Mosco/ BankR )c, the .ote /as short ter#& yielding 21.?G and #aturing in >ctober 133AR K Mrs. Balasubra#ania# ga$e to Mr. 'a/ani on behalf of 'eekay (nter#ark a docu#ent entitled *9igh Lield .ote linked to Russian 1B> Bonds hedged into 6S"+ Mthe (ndicati$e Ter# SheetN. K 15. By reason of the state#ents referred to in paragraph 3 hereof MMrs. Balasubra#ania#N represented to Mr. 'a/ani on behalf of 'eekay (nter#ark that the instru#ent sold by the Bank to 'eekay (nter#ark /as a 1B> .ote& the ter#s of /hich /ere represented as aforesaid. 1A. 'eekay (nter#ark relied as aforesaid on the said

representations in entering into the Transaction.+ 21. This /as intended to reflect Mr. 'a/aniEs case that he had been led to e8pect that 'eekay /ould obtain an interest in the 1B> itself and that he /ould not ha$e #ade the in$est#ent on its behalf if he had realised that it /ould obtain no interest in the underlying 1B>

because that /ould gi$e it no roo# for #anoeu$re if there /ere a default by the Russian go$ern#ent. 9o/e$er& ( find it difficult to see ho/ Mr. 'a/ani could reasonably ha$e dra/n the conclusion that 'eekay /ould obtain an interest in the 1B> itself fro# the representations pleaded in paragraph 3 and the (ndicati$e Ter# Sheet. 22. The %udge found that in the course of her $arious con$ersations /ith Mr. 'a/ani on 1st and 2nd Debruary Mrs. Balasubra#ania# had #isrepresented the nature of the in$est#ent that -.0 /as offering its clients by gi$ing hi# the i#pression that 'eekay /ould obtain a proprietary interest of so#e kind in a 1B> and that he had been induced by that #isrepresentation to #ake the in$est#ent on its behalf. 9e therefore a/arded 'eekay da#ages in the a#ount of its loss under section 2)1, of the Misrepresentation -ct 1345 . (t is against that decision that -.0 no/ appeals. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 2A By the end of the trial it /as co##on ground that a contract bet/een 'eekay and -.0 did not co#e into e8istence until the docu#ents had been returned to the bank at the earliest& and probably not until the bank acted on the instructions contained in 'eekayEs letter of 5th Debruary. (n those circu#stances Mr. 'y#ont .!. for -.0 sub#itted that /hate$er Mrs. Balasubra#ania# had said about the in$est#ent in the course of her earlier con$ersations /ith Mr. 'a/ani& any #isrepresentation as to the nature of the in$est#ent product /as dispelled by the ter#s of the DT!s of /hich Mr. 'a/ani& ha$ing signed the disclosure state#ent& #ust be taken to ha$e been a/are& /hether he had actually read the# or not. -ccordingly& 'eekay could no longer say that it had been induced to enter into the contract by any representations #ade in the course of the earlier con$ersations.

JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

?? The argu#ent /as based on the follo/ing t/o passages in the Risk "isclosure State#ent: *Lou should also ensure that you fully understand the nature of the transaction entering.+ and *The issuer assu#es that the custo#er is a/are of the risks and practices described herein& and that prior to each transaction the custo#er has deter#ined that such transaction is suitable for hi#.+ /hich Mr. 'a/ani on behalf of 'eekay confir#ed by his signature that he had read and understood. Mr. 'y#ont sub#itted that as a result of ha$ing done so Mr. 'a/ani and 'eekay /ere estopped fro# asserting that they had not understood the nature and effect of the DT!s and so could not #aintain that they had been induced by #isrepresentation to enter into the contract. ?4 There is no reason in principle /hy parties to a contract should not agree that a certain state of affairs should for# the basis for the transaction& /hether it be the case or not. Dor e8a#ple& it #ay be desirable to settle a disagree#ent as to an e8isting state of affairs in order to establish a clear basis for the contract itself and its subseCuent perfor#ance. @here parties e8press an agree#ent of that kind in a contractual docu#ent neither can subseCuently deny the e8istence of the facts and #atters upon /hich they ha$e agreed& at least so far as concerns those aspects of their relationship to /hich the agree#ent /as directed. The contract itself gi$es rise to an estoppel: see !olchester Borough !ouncil $ S#ith M1331N !h. ==A& affir#ed on appeal M1332N !h. =21 . and contractual relationship into /hich you are

?5. (t is co##on to include in certain kinds of contracts an e8press ackno/ledg#ent by each of the parties that they ha$e not been induced to enter the contract by any representations other than those contained in the contract itself. The effecti$eness of a clause of that kind #ay be challenged on the grounds that the contract as a /hole& including the clause in Cuestion& can be a$oided if in fact one or other party /as induced to enter into it by #isrepresentation. 9o/e$er& ( can see no reason in principle /hy it should not be possible for parties to an agree#ent to gi$e up any right to assert that they /ere induced to enter into it by #isrepresentation& pro$ided that they #ake their intention clear& or /hy a clause of that kind& if properly drafted& should not gi$e rise to a contractual estoppel of the kind recognised in !olchester Borough !ouncil $ S#ith . 9o/e$er& that particular Cuestion does not arise in this case. - clause of that kind #ay )depending on its ter#s, also be capable of gi$ing rise to an estoppel by representation if the necessary ele#ents can be established: see 7.-. 1ri#stead P Son Ltd $ Mc1arrigan )!.-., )unreported& 25th >ctober 1333, . ?A. (nsofar as the argu#ent in this case turns on the true construction and effect of the contractual docu#ents )including the Risk "isclosure State#ent, and is one to /hich no further findings of fact #ight ha$e been rele$ant& -.0 should& in #y $ie/& be allo/ed to ad$ance it. ( /ould therefore grant the bank per#ission to a#end its notice of appeal to raise the issue of contractual estoppel& but ( /ould not allo/ it at this stage to contend that there /as an estoppel by representation since the %udge /as not asked to consider that Cuestion and did not #ake findings in relation to it. The Cuestion then is /hether& in the light of Mr. 'a/aniEs signature of the declaration at the foot of the Risk "isclosure State#ent 'eekay& is precluded as a #atter of contract fro# contending that it did not understand the true nature of the in$est#ent.

?3. The %udge held in paragraph 3: of his %udg#ent that the ad$ice to in$estors in the Risk "isclosure State#ent pro$ided no ans/er to the clai# for #isrepresentation. 9e did not e8plain in ter#s /hy he took that $ie/& but ( think he #ust ha$e considered that because it /as couched in general ter#s and did not pro$ide any specific infor#ation about the in$est#ent being offered to 'eekay& it could not dispel any #isunderstanding Mr. 'a/ani had obtained fro# his con$ersations /ith Mrs. Balasubra#ania#. 9o/e$er& it does not appear that he /as asked to consider the contractual effect of the docu#ents or the particular argu#ent ad$anced before us. 9e also considered that Mr. 'a/aniEs letter gi$ing instructions to the bank to #ake the in$est#ent on behalf of 'eekay should ha$e #ade it clear to the bank that he /as still under a #isapprehension as to its nature. That ( find rather difficult to understand since& as far as ( can see& there is nothing in that letter to indicate that Mr. 'a/aniEs understanding of the in$est#ent differed in any /ay fro# the description set out in the DT!s to /hich the letter itself referred. 4I. The purpose of the Risk "isclosure State#ent /as both to dra/ to the attention of the in$estor the need for caution /hen in$esting in e#erging #arkets and to #ake it clear that -.0 /as only /illing to enter into a contract /ith hi# on the assu#ption that he had satisfied hi#self that the transaction /as suitable for hi#. By confir#ing that he had read and understood the state#ent and returning it /ith his instructions to #ake the in$est#ent Mr. 'a/ani offered to enter into a contract /ith -.0 on behalf of 'eekay on those ter#s and that offer /as accepted by the bank /hen it i#ple#ented his instructions. -s a result it /as part of the contract bet/een the# that 'eekay /as a/are of the nature of the in$est#ent it /as seeking to purchase and had satisfied that it /as suitable for its needs. (n those circu#stances& and since it is not suggested that the bank #isrepresented to Mr. 'a/ani the effect of

the docu#ents& ( do not think that it is open to 'eekay to say that it did not understand the nature of the transaction described in the DT!sR and if that is so& it cannot assert that it /as induced to enter into the contract by a #isunderstanding of the nature of the in$est#ent deri$ed fro# /hat Mrs. Balasubra#ania# had said about the product so#e days earlier. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ Lord Justice !had/ick: 5I... The Risk "isclosure State#ent /as a contractual docu#ent S as Mr 'a/ani recognised /hen he returned it& signed& /ith the letter of 5 Debruary 133A. -.0 accepted the in$est#ent instructions in that letter on the basis of the in$estorEs confir#ation that it had read and understood the ter#s of the State#ent. That confir#ation& as it see#s to #e& operates as a contractual estoppel to pre$ent 'eekay fro# asserting in litigation that it had not& in fact read and understood the Risk "isclosure State#ent. -nd& if it had read and understood the Risk "isclosure State#ent& it #ust be taken to ha$e accepted that -.0 /ould assu#e that it fully understood the nature of the transaction into /hich it /as entering& /as a/are of the risks& and had deter#ined that the transaction /as suitable for its purposes. 1i$en that& 'eekay could not be heard to say that Mr 'a/ani had assu#ed that the DT!s /hich he had signed on its behalf did not need to be read and understood.

)pringwell Navigation &orporation *a +ody ,orporate- v .P /organ &hase Bank *0ormerly known as 1he &hase /anhattan Bank- *a +ody ,orporate- and 2thers [ !!(# $%H& 33(" *&omm-

MThe paragraph nu#bers refer to the official reportN MDootnotes ha$e been o#ittedN JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ ??I. (n #y %udg#ent& the ratio of the decision in Lo/e $ Lo#bank cannot& /hen analysed in its conte8t& be regarded as authority for the far-reaching proposition that there can ne$er be an agree#ent in a contract that the parties are conducting their dealings on the basis that a past e$ent had not occurred& or that a particular fact /as the case& although both parties kno/ that& in reality& that past e$ent had& or #ight ha$e& occurred& or that the particular fact /as not& or #ight not ha$e been the case. -s ( ha$e already pointed out& all that the !ourt of -ppeal actually had to decide for the purposes of Lo/e $ Lo#bank )in relation to the first point, /as that the false state#ent in the agree#ent as to non-notification of purpose /as one /hich fell foul of section A):, of the 13:A -ct. -lthough "iplock J /ent further than this& and concluded that the so-called agree#ent had& in conte8t& to be regarded as a representation and therefore satisfy the reCuire#ents of an estoppel by representation& the reality& ( suggest& is that he regarded the socalled *agree#ent+ as no #ore than a sha# pro$ision of the type shortly thereafter recognised by the !ourt of -ppeal )including "iplock LJ, in Snook $ London P @est Riding (n$est#ents Ltd M1345N 1 -ll 7R ?1A . ( do not consider that he /as addressing the issue /hether a contractual estoppel can e$er be based on an agreed state#ent about past facts& e$en though they #ay not satisfy the reCuire#ents of an estoppel by representation. ??1 (n 'eekay& ) supra , the t/o substanti$e %udg#ents /ere gi$en by Moore-Bick LJ and !had/ick LJ. Moore-Bick LJ first considered the defendantEs argu#ent that the clai#ant /as not induced to enter into the purchase by reason of the oral #isrepresentation and

held that this /as /ell-founded. Moore-Bick LJ concluded that he /as& instead& induced by his o/n assu#ption that the in$est#ent product described in the docu#entation corresponded to the description he had pre$iously been gi$en. >n that basis& Moore-Bick LJ reached the conclusion that the appeal should be allo/ed. 9o/e$er& he then /ent on to consider an alternati$e argu#ent by the defendant& to the effect that the clai#ant /as estopped fro# relying on any #isrepresentation by reason of the ter#s of the docu#entation /hich it had signed. That docu#entation included t/o passages in a risk disclosure state#ent& /hich contained detailed /arnings to in$estors of the risks associated /ith $arious kinds of e#erging #arkets in$est#ents& in the follo/ing ter#s: *Lou should also ensure that you fully understand the nature of the transaction and contractual relationship into /hich you are entering+ and *The issuer assu#es that the custo#er is a/are of the risks and practices described herein& and that prior to each transaction the custo#er has deter#ined that such transaction is suitable for hi#+.

??2

Moore-Bick

LJ

concluded /hich

that

these

clauses any

created

a of

contractual said:

estoppel

pre$ented

allegation

#isrepresentation as to the nature of the underlying instru#ent. 9e

*?4. There is no reason in principle /hy parties to a contract should not agree that a certain state of affairs should for# the basis for the transaction& /hether it be the case or not. Dor e8a#ple& it #ay be desirable to settle a disagree#ent as to an e8isting state of affairs in order to establish a clear basis for the contract itself and its subseCuent perfor#ance. @here parties e8press an agree#ent of

that kind in a contractual docu#ent neither can subseCuently deny the e8istence of the facts and #atters upon /hich they ha$e agreed& at least so far as concerns those aspects of their relationship to /hich the agree#ent /as directed. The contract itself gi$es rise to an estoppel: see !olchester Borough !ouncil $ S#ith M1331N !h. ==A& affir#ed on appeal M1332N !h.=21 . ?5. (t is co##on to include in certain kinds of contracts an e8press ackno/ledg#ent by each of the parties that they ha$e not been induced to enter the contract by any representations other than those contained in the contract itself. The effecti$eness of a clause of that kind #ay be challenged on the grounds that the contract as a /hole& including the clause in Cuestion& can be a$oided if in fact one or other party /as induced to enter into it by #isrepresentation. 9o/e$er& ( can see no reason in principle /hy it should not be possible for parties to an agree#ent to gi$e up any right to assert that they /ere induced to enter into it by #isrepresentation& pro$ided that they #ake their intention clear& or /hy a clause of that kind& if properly drafted& should not gi$e rise to a contractual estoppel of the kind recognised in !olchester Borough !ouncil $ S#ith . 9o/e$er& that particular Cuestion does not arise in this case. - clause of that kind #ay )depending on its ter#s, also be capable of gi$ing rise to an estoppel by representation if the necessary ele#ents can be established: see 7 - 1ri#stead P Son Ltd $ Mc1arrigan )!-, )unreported& 25th >ctober 1333, K 4I. The purpose of the Risk "isclosure State#ent /as both to dra/ to the attention of the in$estor the need for caution /hen in$esting in e#erging #arkets and to #ake it clear that -.0 /as only /illing to enter into a contract /ith hi# on the assu#ption that he had satisfied hi#self that the transaction /as suitable for hi#. By

confir#ing that he had read and understood the state#ent and returning it /ith his instructions to #ake the in$est#ent Mr. 'a/ani offered to enter into a contract /ith -.0 on behalf of 'eekay on those ter#s and that offer /as accepted by the bank /hen it i#ple#ented his instructions. -s a result it /as part of the contract bet/een the# that 'eekay /as a/are of the nature of the in$est#ent it /as seeking to purchase and had satisfied that it /as suitable for its needs. (n those circu#stances& and since it is not suggested that the bank #isrepresented to Mr. 'a/ani the effect of the docu#ents& ( do not think that it is open to 'eekay to say that it did not understand the nature of the transaction described in the DT!sR and if that is so& it cannot assert that it /as induced to enter into the contract by a #isunderstanding of the nature of the in$est#ent deri$ed fro# /hat Mrs. Balasubra#ania# had said about the product so#e days earlier+.

??: Moore-Bick LJ concluded at paragraph 41 by stating: *Dor these reasons too ( /ould allo/ the appeal+. ??= -lthough Moore-Bick LJ also considered that the state#ents #ight gi$e rise to an estoppel by representation& in addition to the contractual estoppel& if the conditions set out in 7- 1ri#stead P Son Ltd $ Mc1arrigan applied& as there had been no e$idential enCuiry into those conditions& he concluded that point could not be pursued on appeal. ??? La/rence !ollins LJ agreed /ith Moore-Bick LJ. !had/ick LJ also agreed but added a %udg#ent of his o/n. (n that %udg#ent& he re%ected the %udgeEs finding of induce#ent for three reasons. The third reason /as as follo/s: *Third& 'eekay could not be heard to say )through Mr 'a/ani, that

it had thought it unnecessary to read and understand the DT!s. The Risk "isclosure State#ent /as a contractual docu#ent S as Mr 'a/ani recognised /hen he returned it& signed& /ith the letter of 5 Debruary 133A. -.0 accepted the in$est#ent instructions in that letter on the basis of the in$estorEs confir#ation that it had read and understood the ter#s of the State#ent. That confir#ation& as it see#s to #e& operates as a contractual estoppel to pre$ent 'eekay fro# asserting in litigation that it had not& in fact read and understood the Risk "isclosure State#ent. -nd& if it had read and understood the Risk "isclosure State#ent& it #ust be taken to ha$e accepted that -.0 /ould assu#e that it fully understood the nature of the transaction into /hich it /as entering& /as a/are of the risks& and had deter#ined that the transaction /as suitable for its purposes. 1i$en that& 'eekay could not be heard to say that Mr 'a/ani had assu#ed that the DT!s /hich he had signed on its behalf did not need to be read and understood+. ??4 ( accept Mr. 9apgoodEs sub#issions that: i, the decision of the !ourt of -ppeal in 'eekay is not obiter insofar as it relates to contractual estoppelR ii, 'eekay and subseCuent authorities indeed recognise that there is a difference bet/een contractual estoppel and estoppel by representation& in that the for#er species of estoppel does not reCuire the parties to pro$e detri#ental relianceR iii, a contractual estoppel can arise fro# an agree#ent or a representation about past factsR i$, the decision in 'eekay /as not reached per incuriam & and is not inconsistent /ith the ratio in Lo/e $ Lo#bank R and $, the decision in 'eekay sho/s that the contractual effect of the Rele$ant 'ro$isions is to preclude the co#ing into e8istence of any

general duty of care to gi$e in$est#ent ad$iceR and Spring/ell is not entitled to contend that the Rele$ant 'ro$isions are not binding upon it si#ply because: at $arious stages of the relationship& the (n$est#ent Bank& by J-& )or indeed the 'ri$ate Bank, #ay& to a greater or lesser e8tent& ha$e been gi$ing ad$ice or #aking reco##endations to -'R or -' #ay& to a greater or lesser e8tent& ha$ing been relying on such ad$ice in #aking Spring/ellEs in$est#ent decisions.

??5 My reasons for accepting Mr. 9apgoodEs sub#issions on this point are as follo/s: ??A (n 'eekay & all three %udges /ere agreed that the pro$isions in the docu#entation ga$e rise to a contractual estoppel /hich contractually precluded the clai#ant fro# #aking assertions of fact to the contrary. This /as in addition to and distinct fro# any Cuestion of estoppel by representation. Their reasoning /as fir#ly rooted in& and consistent /ith& the i#portance of freedo# of contract and contractual certainty. The particular clauses in that case concerned the Cuestion of understanding as to the nature of the instru#ent. That has direct rele$ance to certain of the allegations #ade by Spring/ell in the conte8t of its #isrepresentation clai#. But the principle e8tends #ore broadly and& in #y %udg#ent& applies to any other for# of contractual state#ent& for instance as to sophistication or non-reliance on ad$ice generally. (n each case& the parties are contractually free to deter#ine the factual basis upon /hich they conduct business. ??3 (t is clear& contrary to Mr. BrindleEs sub#issions& that the decision on contractual estoppel /as indeed part of the ratio of 'eekay. Thus& although Moore-Bick LJ did say that it /as unnecessary to decide the Cuestion& he /ent on to do so& and then

e8pressly stated that he allo/ed the appeal *K for these reasons too+. Moreo$er& !had/ick LJEs decision on contractual estoppel /as one of the three reasons he ga$e for concluding that the %udge /as /rong. ?4I. (n such circu#stances& it /ould be surprising if the unani#ous reasoning of such a strong tribunal& in a decision /hich is fully consistent /ith underlying funda#ental principles& did not represent the la/. (ndeed& subseCuent authorities sho/ that 'eekay has been taken to represent the la/ on contractual estoppel. ?41 Thus& for e8a#ple& in Bottin (nternational (n$est#ents $ Tenson & Blackburne J regarded hi#self as bound by it. (t /as also applied by -ndre/ S#ith J in "onegal (nternational $ Republic of 0a#bia & /here the %udge held that an argu#ent based on #isrepresentation /as si#ply not open to one of the parties in $ie/ of a clause in an agree#ent to the effect that there /as no reliance on any state#ent or representation. Referring e8pressly to MooreBick LJEs %udg#ent& -ndre/ S#ith J said that *there is no reason that effect should not be gi$en to this pro$ision+. The decision has also been follo/ed by the !ourt of -ppeal of Singapore in >rient !entre (n$est#ents $ Societe 1enerale M2II5N S1!- 2= )at paragraphs ?1F?:,. ?42. .or do ( accept that there is any inconsistency bet/een 'eekay and the line of authority running fro# Lo/e $ Lo#bank to @atford 7lectronics . There can be no Cuestion of the decision in 'eekay being gi$en per incuriam or /ithout kno/ledge of the pre$ious case la/: Moore-Bick LJ /as ob$iously a/are of 1ri#stead $ Mc1arrigan because he referred to it in his %udg#entR !had/ick LJ /as ob$iously a/are of both 1ri#stead $ Mc1arrigan and @atford 7lectronics because he ga$e the leading %udg#ent in both those casesR Lo/e $ Lo#bank /as cited )by !had/ick LJ, in both

1ri#stead $ Mc1arrigan and @atford 7lectronics . ?4: Second& the contractual estoppel argu#ent of 'eekay is not in any /ay inconsistent /ith the analysis of estoppel by representation. -s Mr. 9apgood sub#itted& they are different for#s of estoppel /ith different %urisprudential bases. This /as recognised by Moore-Bick LJ in his %udg#ent in 'eekay& and he considered both separately. ?4=. Third& ( do not consider that& on a proper analysis& there is any inconsistency /ith either the decision or the reasoning in Lo/e $ Lo#bank . -s ( ha$e already e8plained& the rele$ant point in Lo/e $ Lo#bank has to be $ie/ed in its rele$ant statutory and factual conte8t. (n that case& the /ritten docu#ent recording a #ere state#ent as to past facts could not as a #atter of language a#ount to a contractual pro#ise. But "iplock J hi#self dre/ a distinction bet/een such a state#ent as to past facts and: *a pro#ise by the pro#isor to the pro#isee that acts /ill be done in the future or that facts e8ist at the ti#e of the pro#ise or /ill e8ist in the future+. )My e#phasis, The analysis in 'eekay is consistent /ith this analysis: /hat is en$isaged& as described by Moore-Bick LJ& is an agree#ent *that a certain state of affairs should for# the basis for the transaction+. That is undoubtedly capable of a#ounting to a contractual pro#ise and Lo/e $ Lo#bank does not appear to suggest the contrary& as indicated by the passage underlined abo$e& e$en though ( ha$e so#e difficulty in seeing the distinction bet/een a *a state#ent as to past facts+ and a state#ent that *facts e8ist Mor do not e8istN at the ti#e of the pro#ise+. Be that as it #ay& it /ould be surprising if the result /ere other/ise: parties #ust al/ays be able to deter#ine the basis upon /hich they conduct business.

?4?. Moreo$er& as Mr. 9apgood sub#itted& this analysis is also consistent /ith the %udg#ent of Ri8 J )as he then /as, in "eepak Dertilisers $ (!( . 1?5 (n that case there /as an entire agree#ent clause& /hich pro$ided that: *there are not any agree#ents& understandings& pro#ises or conditions oral or /ritten& e8pressed or i#plied& concerning the sub%ect #atter /hich are not #erged into this contract and superseded hereby+. Ri8 J held )in /hat /as& in effect& a precursor to the 'eekay analysis, that such a clause /as not& as a #atter of construction& apt to e8clude a clai# in #isrepresentation& but that it did& as a #atter of construction& e8clude any clai#s for breach of collateral /arranties. 9e relied on an unreported decision to si#ilar effect of Bro/ne-@ilkinson J. The clai#ant contended )in a #anner $ery si#ilar to Spring/ell, that Bro/ne-@ilkinson JEs decision had been per incuriam because it /as e8pressed in ignorance of Lo/e $ Lo#bank and that& based on Lo/e $ Lo#bank & a clause such as this could only take effect as an estoppel by representation. Ri8 J re%ected this argu#ent& concluding that Lord "iplock in Lo/e $ Lo#bank /as *speaking in a /holly different conte8t+. Durther )and in language si#ilar to 'eekay ,& he continued: *( do not see /hy parties to a contract are not perfectly capable of agreeing /hat are and /hat are not the ter#s of any contract binding on the#. That after all is essentially /hat parties seek to do& #ore or less successfully& /hen they agree to reduce their agree#ents to /riting+. ?44 (n conclusion on this topic& ( see nothing inappropriate or co##ercially offensi$e about !hase being per#itted to rely on the state#ents contained in the Rele$ant 'ro$isions& e$en if it could be said that in so#e respects they did not accurately reflect e$ery

aspect of the dealing relationship. -ll of the rele$ant ter#s of the contractual docu#entation fall sCuarely /ithin the 'eekay analysis& as contractual representations )and in so#e cases& /arranties, or *agree#ents+ as to the basis upon /hich the business /as to be conducted. Thus& for e8a#ple& /here the contract pro$ided that& by placing an order& Spring/ell represented )clause = of the 1335 ""!S Letter, that it /as a sophisticated in$estor and that it had independently and /ithout reliance on !hase #ade a decision to acCuire the instru#ent& that /as not a #ere state#ent of historical fact& but a contractual representation for#ing the agreed and binding basis upon /hich the parties /ould transact e$ery future purchase. The sa#e analysis applies in respect of e$ery clause in e$ery docu#ent to /hich Spring/ell takes this ob%ection. The fact that so#e state#ents are e8pressed in the language of representation or ackno/ledge#ent cannot& in #y $ie/& #ake any difference to the analysis that the state#ents gi$e rise to a contractual estoppel. ?45. .or do ( accept Mr. BrindleEs sub#issions that contractual estoppel cannot be utilised to enable the parties to agree that they /ill deal /ith each other& going for/ard& on the basis that no ad$ice should be dee#ed to ha$e been gi$en. >f course& J- /as /ell a/are& for e8a#ple& that he had #ade reco##endations as to the ad$isability of purchasing the Dailed .otes )i.e. the 1B>-Linked .otes,. That& in #y %udg#ent& does not pre$ent a contractual estoppel fro# arising. ?4A. 7$en if& contrary to #y conclusion& !hase has to rely on estoppel by representation& the three li#bs of the test are adeCuately satisfied to per#it it to do so. Thus& the ter#s of the Rele$ant 'ro$isions are clear and una#biguous. By signing the $arious docu#ents& Spring/ell so conducted itself that a reasonable person in the position of !hase /ould take the representation to be

true and belie$e that Spring/ell intended that !hase should act upon it. >n #y findings of fact& !hase did& at least to a certain e8tent& belie$e the representations to be true& and /as induced by such belief to act upon the#. -t the ti#e the rele$ant docu#ents /ere signed& !hase did belie$e that Spring/ell /as a sophisticated and e8perienced in$estor /hich /as fully capable of #aking& and did in fact #ake& its o/n decision on e$ery purchase that it #ade. -lthough !hase kne/ that J- /as gi$ing -' ad$ice )in the nature of reco##endations and opinions based on !hase research #aterials, and that -' relied on such ad$ice in reaching his in$est#ent decisions& it kne/ that -' /ould in fact al/ays #ake his o/n decision as to /hether to in$est or not. Durther& !hase in fact thought that Spring/ell did not look to !hase as an in$est#ent ad$isor& and did not consider that !hase /as its in$est#ent ad$isor. Thus the representations in one sense reflected !haseEs o/n $ie/ of the reality. !ertainly it acted in reliance on those beliefs& because it /ould not ha$e traded /ith Spring/ell had Spring/ell not signed the docu#ents. But if !hase )contrary to the abo$e $ie/,& in order to satisfy the reCuire#ents for estoppel by representation& has to sho/ that it did not belie$e that -' relied at all on any of J-Es ad$ice in co#ing to his in$est#ent decisions& then ( conclude that it /ould fail to establish estoppel by representation.

1rident 1ur+oprop *4u+lin- Limited v 5irst 5light &ouriers Limited [ !!(# $%H& 3"(" *&omm[Footnotes have been omitted]
The 9onourable Mr Justice -ikens 1 This is an application by the clai#ant )*Trident+,& for su##ary

%udg#ent of its clai# against the defendant )*DD!L+, pursuant to !'R 'art 2= . Trident is a co#pany /hich o/ns and leases co##ercial aircraft. DD!L is one of (ndiaEs leading e8press courier co#panies /ith a $ery large annual turno$er. 2 >n ?th Septe#ber 2II?& Trident entered into t/o -ircraft >perating Lease -gree#ents /ith DD!L )*the Lease -gree#ents+,. 6nder each Lease -gree#ent& Trident& as the lessor& agreed to lease to DD!L& as lessee& an -T' type aircraft #anufactured by B-7 Syste# Regional -ircraft Li#ited )*B-7+,. The t/o aircraft had the serial nu#bers 2I?1 and 2I?=. ( /ill refer to the# respecti$ely as *-ircraft 2I?1+ and *-ircraft 2I?=+. : The t/o Lease -gree#ents are in identical ter#s. ( /ill refer belo/ to the rele$ant clauses of the contracts. = TridentEs clai#s arise under both Lease -gree#ents. (n short& Trident alleges that it is entitled to su##ary %udg#ent because DD!L /as in breach of its obligation to pay rent under each of the t/o contracts. Trident clai#s that the continuing failure of DD!L to pay rent entitled it to ter#inate both Lease -gree#ents and to reco$er possession of the t/o aircraft. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ The >utline Dacts 5 (n 2II= DD!L /ished to buy or lease cargo aircraft to carry e8press cargo across (ndia to different destinations. DD!L appointed Tane%a -erospace and -$iation Li#ited )*T--L+, as a consultant& so it could reco##end to DD!L a suitable aircraft for this pro%ect. (n Septe#ber 2II=& Mr Ra% Singh& the "irector of Sales for B-7& approached Mr Santosh "eshpande of T--L. Mr Singh offered -T' type aircraft for use by DD!L on its proposed cargo routes. A DD!L then conducted negotiations /ith B-7 /hich led to the

e8ecution of the t/o aircraft leases. DD!L alleges that all the negotiations as to the ter#s of the aircraft leases /ere conducted bet/een DD!L and B-7R the deli$ery of the aircraft /as organised bet/een DD!L and B-7 and the t/o leases /ere signed by -ntoine !hateau$ieu8 of B-7 on behalf of Trident. 3. "uring the negotiations bet/een DD!L and B-7 there /ere discussions about t/o particular #atters. Dirst& the payload that the aircraft /ould be able to carry on the $arious proposed routesR secondly& flight ti#es for those routes. (n July 2II? B-7 pro$ided DD!L /ith a Route -nalysis and 'erfor#ance Study& gi$ing payload pro%ections and flight ti#es if an aircraft /as carrying the #a8i#u# payload. (t is DD!LEs case that #any of the representations about the payload and flight ti#es in the July 2II? study /ere #aterially inaccurate. DD!L alleges that B-7 acted as TridentEs agent in #aking these representations. DD!L also alleges that it /ould not ha$e taken the t/o aircraft )plus a third& *-ircraft 2I:3+, under the Lease -gree#ents& but for the representations that /ere #ade in this study. 1I. >n 2= May 2II4& -ircraft 2I?= /as deli$ered to and accepted by DD!L at LidkUping airport in S/eden& ha$ing been inspected by Mr 1opalakrishna& DD!LEs !hief of >perations& and other technical e8perts of DD!L. The -cceptance !ertificate confir#ed that *"eli$ery+ under the ter#s of the Lease -gree#ent /as effected on 2= May 2II4 and that the aircraft /as inspected by the technical e8perts of DD!L fro# 15 May 2II4. The certificate also stated that the aircraft co#plied fully /ith the condition reCuired on deli$ery by the Lease -gree#ent& sa$e to the e8tent set out in an -cceptance Reser$ations -gree#ent contained in -ppendi8 = of the -cceptance !ertificate. This aircraft began to operate for DD!L in -ugust 2II4. 11& -ircraft 2I:3 /as deli$ered in July 2II4 and began to operate

in >ctober 2II4. 12. -ircraft 2I?1 /as deli$ered on 14 >ctober 2II4 at Southend airport. There /as the sa#e inspection procedure as for -ircraft 2I?=. This aircraft began to operate in .o$e#ber 2II4. 1:. DD!L alleges that all three aircraft /ere unreliable and prone to defects& /ith the result that DD!L /as unable to achie$e its operational ob%ecti$es. ****************************************************** 14. DD!L stopped paying rent under the t/o Lease -gree#ents /ith /hich ( a# concerned as fro# Septe#ber 2II5. Trident alleges that this put DD!L in breach of its obligation under the Lease -gree#ents to pay rent pro#ptly on a #onthly basis in the a#ount set out in schedule A of the Lease -gree#ents: clause ?.2. Trident alleges that the failure by DD!L to #ake any pay#ents after Septe#ber 2II5& or DD!LEs late pay#ents constituted an *7$ent of "efault+ /ithin clause 15)a, of the Lease -gree#ents. Trident says that it /as therefore entitled to ser$e a .otice of "efault under clause 1A of the Lease -gree#ents& /hich it did on 1Ath >ctober 2II5. DD!L initially accepted that its decision to cease #aking pay#ents under the Lease -gree#ents put it in breach of the Lease -gree#ents and entitled Trident to ser$e notices of ter#ination on :I January 2IIA. 9o/e$er& DD!L no/ alleges that it rescinded the t/o Lease -gree#ents on :Ith -ugust 2II5& because of defects in the aircraft or #isrepresentations& by deciding to stop using the aircraft on that date. DD!L says that the rescission /as effecti$e before TridentEs purported ter#ination. DD!L alleges in the alternati$e that if it did not rescind the Lease -gree#ents by the e#ail of :Ith -ugust 2II5& then it retains the right to rescind the#& such that no rent /ould be payable to Trident and there /ould be no clai# by Trident for breach of contract.

JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 2: Trident disputes the factual allegations /hich for# the basis of DD!LEs defences. 9o/e$er& for the purposes of the !'R 'art 2= application& Trident accepts that the court #ust assu#e that the allegations concerning #isrepresentation and defects are arguable. (t should be noted ne$ertheless that DD!L does not allege that the #isrepresentations /ere #ade fraudulently by Trident or fraudulently by B-7 as agent for Trident. 2= TridentEs ans/er is that the pro$isions of the Lease -gree#ents preclude DD!L ad$ancing either of the defences or counterclai#s on /hich it relies. enter into the Trident argues that clauses 13.1 and 13.2 Lease -gree#ents by a non-fraudulent contractually pre$ent DD!L fro# asserting that it /as induced to #isrepresentation. Trident also says that the 6nfair !ontract Ter#s -ct 1355 does not apply to the Lease -gree#ents& because they are *international supply contracts+ /ithin the ter#s of section 24)=, )a, of that -ct )* 6!T- 1355 +,& so that these contracts fall outside the scope of the -ct. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ 23. (f Mr Tickery succeeds in sho/ing that there is a real prospect of success on either of the t/o defences he has outlined& this su##ary %udg#ent application #ust fail. ( #ust therefore deal /ith both defences put for/ard by DD!L. The defence of 're S contractual #isrepresentation :I Three issues arise in relation to the argu#ents on clauses 13.1 and 13.2 of the Lease -gree#ents. Dirst& can parties to a contract agree& by contract& to abandon any rights to assert that they /ere induced to enter into that contract by #isrepresentationV Mr Tickery accepts that parties can agree to do so& at least in relation to clai#s

based upon non S fraudulent #isrepresentations: see 'eekay (nter#ark Ltd $ -ustralia and .e/ 0ealand Banking 1roup Ltd & in particular at paragraph ?5& per Moore S Bick LJ. But Mr Tickery sub#its that clause 13 in the Lease -gree#ents does not assist Trident at the su##ary %udg#ent stage. :1 The second issue is /hether& properly construed& clauses 13.1 and 13.2 do& on their correct construction& preclude DD!L fro# asserting the right to clai# rescission of the Lease -gree#ents& or da#ages& for non S fraudulent #isrepresentation. The third issue is /hether& assu#ing that they do so& DD!L can rely on 6!T- 1355 to defeat clauses 13.1 and 13.2. This turns on /hether Mr Mc'herson is right in his sub#ission that 6!T- 1355 is inapplicable because the Lease -gree#ents are *international supply contracts+ /ithin section 24 of 6!T- 1355 . :2 !lause 13.1 is headed *78clusion+. (n the first paragraph of it& DD!L& as *Lessee+ * agrees and acknowledges + that& sa$e as e8pressly stated in the Lease -gree#ent& Trident )as *Lessor+, shall not ha$e any liability in relation to * the description satisfactory quality, fitness for any use or purpose condition or design of the Aircraft +. The key part of clause 13.1 of the Lease -gree#ents for present purposes is in the last paragraph& /hich states: *The Lessee Mie DD!LN also agrees and ackno/ledges that sa$e as e8pressly stated in this -gree#ent and the other Transaction "ocu#ents to /hich the Lessor is a party& the Lessor has not and shall not be dee#ed to ha$e #ade any /arranties or representations& e8press or i#plied& about the -ircraft& including but not li#ited to the #atters referred to abo$e+. ::. The parties /ho agree such a clause are thus agreeing that no representations /ere #ade by Trident )as Lessor,& or& if any representations /ere #ade& then it is *dee#ed+ that they /ere not.

The legal effect of pro$isions such as this has been analysed by the courts in ter#s of an estoppel created by contract: see !olchester Borough !ouncil $ S#ith & at =34 per Derris JR and the 'eekay case & at paragraph ?4 per Moore S Bick LJ and at paragraph 5I per !had/ick LJ. -s Moore S Bick LJ points out at paragraph ?4 in the 'eekay case & it is co##ercially con$enient and desirable for parties to a contract to agree that a certain state of affairs )ie. that no pre S contractual representations /ere #ade, is the case& so as to pro$ide a clear basis for the contract itself. (f the parties do agree a certain factual basis on /hich the contract is #ade& the contractual agree#ent is that neither party can subseCuently deny that basis. 9ence the phrase *estoppel by contract+. := (n 7- 1ri#stead P Sons Ltd $ Mc1arriga & !had/ick LJ stated& at page :1 of the %udg#ent& that if a clause contains an agree#ent that parties /ill not rely on pre S contract representations& then this can also operate as an *e$idential estoppel+ against a party that subseCuently /ished to rely on a pre S contractual representation to found a clai#. Mr Tickery sub#its that this is the proper analysis of clause 13.1 and that this #eans it is i#possible for Trident to succeed on its su##ary %udg#ent application& relying on clause 13.1. 9e sub#its that a party can only rely on an e$idential estoppel if it can de#onstrate that it relied on a representation and /as induced to alter its position as a result of the representation. Mr Tickery sub#its that if& as DD!L contends& Trident kne/ that DD!L /ere in fact relying on the #isrepresentations it is said that B-7 #ade on TridentEs behalf and if& in fact& Trident kne/ that the ackno/ledge#ent of non S reliance by DD!L did not reflect DD!LEs true position& then Trident could not rely on any *e$idential estoppel+ that #ight other/ise be created by the /ording of clause 13.1. That is because Trident could not de#onstrate either )a, that it belie$ed as true any representations of DD!L that it /as not

relying on any pre S contractual representations by TridentR or )b, that it /as induced to enter the contracts by $irtue of such representations by DD!L. (n this respect& Mr Tickery relied upon state#ents of !had/ick LJ in @atford 7lectronics Ltd $ Sanderson !DL Ltd & at paragraph =I. :?. Mr. Mc'hersonEs response /as to ab%ure any reliance on an *e$idential estoppel+. ( a# Cuite satisfied& ha$ing looked at the cases& that the t/o for#s of *estoppel+ are different. ( a# also satisfied that Mr Mc'herson is correct in sub#itting that if he can rely on *contractual estoppel+ as analysed in the 'eekay case & he does not need to rely on an *e$idential estoppel+. Therefore ( /ill concentrate on the issue of *contractual estoppel+ :4 The rele$ant clause in the 'eekay case /as a for# of ackno/ledge#ent that the bank custo#er kne/ the true nature of the contract he /as entering. The rele$ant clause in the 1ri#stead case /as to the effect that the purchaser confir#ed that it had not relied on any representation by the $endors. (n #y $ie/ clause 13.1 in the Lease -gree#ents is of a different nature to those pro$isions. 9ere the parties agree that no representation /as #ade at all. DD!L has agreed /ith Trident that a state of affairs is the case& ie. that there /ere no pre S contract )non S fraudulent, representations by Trident. More i#portantly& the parties agree that this state of affairs is to for# the basis of the transaction. 7$en if it /as not in fact the case that there had been no representations& the parties are free to agree that it /as so and base their contractual relations on that state of affairs& for the reasons that Moore S Bick LJ sets out in the 'eekay case at paragraph ?4. Therefore& sub%ect to the 6!T- 1355 point& ( conclude that Trident can rely on that clause to defeat the #isrepresentation defence. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ

== K6nfair !ontract Ter#s -ct 1355: does it apply to these contractsV =? Section : of the Misrepresentation -ct 1345 & as a#ended& pro$ides that if a contract contains a ter# /hich /ould e8clude or restrict * (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract is made; or (b) any remedy a ailable to another party to the contract by reason of any such misrepresentation +& then the ter# is of no effect& e8cept insofar as it satisfies the reCuire#ents of 6!T- 1355 . Mr Mc'herson argued that clauses 13.1 and 13.2 do not co#e /ithin that definition because& by the last paragraph of clause 13.1& the parties ha$e agreed that no representations /ere #ade. Therefore& there is no potential liability or re#edy to e8clude or restrict. =4 Mr Mc'herson relied on re#arks #ade by !had/ick LJ in @atford 7lectronics Ltd $ Sanderson !DL Ltd & 12 particularly at paragraphs :4 and =1. (n the latter paragraph& !had/ick LJ points out that if parties ha$e& by their contract& ackno/ledged that they ha$e not relied on any pre S contractual representations& then it /ould be * bi!arre + to attribute to the parties an intention to e8clude a liability /hich they thought /ould ne$er arise& unless this conclusion is co#pelled by the /ords used in the contract. =5 Mr Tickery argued to the contrary& relying on the decision of 99J Ray#ond Jack ! )as he then /as, in 1o$ern#ent of 0anQibar $ British -erospace )Lancaster 9ouse, Ltd & 1: particularly at 2:=5FA. =A ( ackno/ledge the force of the logic in !had/ick LJEs state#ents in the @atford 7lectronics case. 9o/e$er& the effect of a clause #ust al/ays depend on its e8act /ording. (n this case the first half of clause 13.1 undoubtedly conte#plates that DD!L #ight assert that Trident /as liable in relation to the description&

#erchantability& satisfactory Cuality or fitness for any use or purpose of the aircraft. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ =3. -ccordingly& unless the Lease -gree#ents are outside the a#bit of 6!T- 1355 because they co#e /ithin the class of *international supply contracts+& those clauses /ould only be effecti$e if they satisfy the *reasonableness+ test set out in section 11 of that -ct. That /ould in$ol$e issues of fact and so preclude su##ary %udg#ent. So ( #ust ne8t consider section 24 of the 1355 -ct. ?I The rele$ant parts of section 24 of the 6!T- 1355 pro$ide as follo/s:

)1, The li#its i#posed by this -ct on the e8tent to /hich a person #ay e8clude or restrict liability by reference to a contract ter# do not apply to liability arising under such a contract as is described in subsection ):, belo/. K ):, Sub%ect to subsection )=,& that description of contract is one /hose characteristics are the follo/ing S )a, either it is a contract of sale of goods or it is one under or in pursuance of /hich the possession or o/nership of goods passesR and )b, it is #ade by parties /hose place of business )or& if they ha$e none& habitual residences, are in the territories of different States )the !hannel (slands and the (sle of Man being treated for this purpose as different States fro# the 6nited Bingdo#,. )=, - contract falls /ithin subsection ):, abo$e only if either S

)a, the goods in Cuestion are& at the ti#e of the conclusion of the contract& in the course of carriage& or /ill be carried fro# the territory of one state to anotherR or )b, the acts constituting the offer and acceptance ha$e been done in the territories of different StatesR or )c, the contract pro$ides for the goods to be deli$ered in the territory of a Stated other than that /ithin /hich /hose territory those acts /ere done+.

?1. (t is agreed that the t/o Lease -gree#ents constitute contracts under /hich the possession of the aircraft /ill pass fro# one party )the lessor, to another )the lessee, and that each party has a place of business in the territories of different states. Therefore the Cuestion is /hether the ter#s of section 24)=, are fulfilled in this case. ?2. Mr Mc'herson sub#its that this case falls /ithin section 24)=, )a, . The t/o aircraft /ere carried fro# the state /here they /ere deli$ered& respecti$ely S/eden and the 6B& to (ndia. -lthough that /as not done at the ti#e of the contracts& it /as conte#plated at that ti#e that the aircraft /ould be carried fro# the state /here they /ere deli$ered to another state& )ie. (ndia, for the purposes of carrying out the hire contracts. Mr Mc'herson relied on re#arks by Mance LJ )as he then /as, in -#iri Dlight -uthority $ B-7 Syste#s 'lc & 1= particularly at paragraph :2& /here he analysed section 24 of 6!T- 1355 & and co##ented on the relationship bet/een section 24)=,)a, and )c, . >n section 24)=,)a, & Mance LJ said: *The structure of section 24)=, is on any $ie/ Cuestionable. Section 24)=,)a, can in reality only be significant in a case /here the offer and acceptance /ere done in one and the sa#e state. K. 9o/e$er&

the drafts#an #ust at least be taken to ha$e had in #ind that s.24)=,)a, is only concerned /ith goods /hich are being& or /ill be& carried bet/een the territory of t/o different states. S.24)=,)a, does not therefore reCuire the seller to ha$e undertaken any obligation to deli$er to any other state. @ithout going into its precise li#its& once classical e8a#ple /ithin s.24)=,)a, /ould be the sale of goods on !(D or D>B ter#s K @hen the drafts#an ca#e to consider the circu#stances in /hich a contract #ade in one state should be treated as international& he #ay ha$e thought that the trigger should also in$ol$e #o$e#ent bet/een different states K+.

?:. Mr Tickery sub#itted that the correct construction of the phrase * will be carried + in section 24)=,)a, & is that it applies to /here the goods are to be deli$ered under the ter#s of the contract of sale or hire. 9e sub#its that it is irrele$ant that the aircraft in fact tra$elled fro# S/eden or the 6B to (ndia. Those flights /ere not undertaken as part of the contractual obligations of the lessor& Trident. (t /as no different fro# a person buying goods in country -& then deciding to take the# for use in country B. ?= Mr Tickery relies on re#arks of !hristopher !larke J in Bal#oral 1roup Ltd $ Borealis )6B, Ltd and others & at paragraphs ==5F==A. 9o/e$er& ( do not read those re#arks as indicating that there has to be a contractual undertaking by one party to the contract to deli$er goods fro# the territory of one state to the territory of another state before the contract co#es /ithin section 24)=,)a, . (ndeed& he can hardly ha$e intended to say that& because in #y $ie/ it /ould ha$e been inconsistent /ith the re#arks of Mance LJ at paragraph :2 of the -#iri Dlight case& to /hich the %udge refers in paragraph ==5. ?? ( ha$e concluded& in line /ith the state#ent of Mance LJ in the

-#iri Dlight case at paragraph :2& that section 24)=,)a, does not reCuire a seller& or hirer& to ha$e undertaken an obligation to deli$er the contractual goods to another state. Section 24)=,)a, is satisfied si#ply if& at the ti#e of the conclusion of the contract& the goods in Cuestion /ill be carried fro# the territory of one state to the territory of another. That /as the case here. ?4 Therefore& 6!T- 1355 does not apply to these t/o Lease -gree#ents. ?5 (t #ust follo/ that DD!L cannot rely on the pre S contract #isrepresentation defence.

1rident 1ur+oprop *4u+lin- Limited v 5irst 5light &ouriers Limited [ !!6# $%&A &iv 6!
Lord Justice Moore-Bick: 1 This is an appeal against an order of -ikens J. gi$ing su##ary %udg#ent for the respondent& Trident Turboprop "ublin Ltd )*Trident+, against the appellant& Dirst Dlight !ouriers Ltd )*Dirst Dlight+,& under !'R 'art 2= . (t raises so#e no$el and interesting Cuestions relating to the interpretation of section 24 of the 6nfair !ontract Ter#s -ct 1355 and section : of the Misrepresentation -ct 1345 . JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ The statutory pro$isions 1I Section 24 of the 6nfair !ontract Ter#s -ct 1355 pro$ides as follo/s:

(nternational supply contracts )1, The li#its i#posed by this -ct on the e8tent to /hich a person #ay e8clude or restrict liability by reference to a contract ter# do not apply to liability arising under such a contract as is described in subsection ):, belo/. )2, The ter#s of such a contract are not sub%ect to any reCuire#ent of reasonableness under section : or =: and nothing in 'art (( of this -ct shall reCuire the incorporation of the ter#s of such a contract to be fair and reasonable for the# to ha$e effect. ):, Sub%ect to subsection )=,& that description of contract is one /hose characteristics are the follo/ingS )a, either it is a contract of sale of goods or it is one under or in pursuance of /hich the possession or o/nership of goods passesR and )b, it is #ade by parties /hose places of business )or& if they ha$e none& habitual residences, are in the territories of different States )the !hannel (slands and the (sle of Man being treated for this purpose as different States fro# the 6nited Bingdo#,. )=, - contract falls /ithin subsection ):, abo$e only if eitherS )a, the goods in Cuestion are& at the ti#e of the conclusion of the contract& in the course of carriage& or /ill be carried& fro# the territory of one State to the territory of anotherR or )b, the acts constituting the offer and acceptance ha$e been done in the territories of different StatesR or )c, the contract pro$ides for the goods to be deli$ered to the territory of a State other than that /ithin /hose territory those acts

/ere done.+

11. The %udge ga$e Dirst Dlight per#ission to appeal only on the Cuestion /hether the leases fell /ithin the scope of section 24)=,)a, & but at the hearing of the appeal Mr. Tickery sought to ad$ance t/o additional points& neither of /hich had been argued belo/ and neither of /hich had been raised in his notice of appeal. 9e needed the per#ission of the court to do so& but since both raise Cuestions of statutory interpretation alone and since the respondent did not ob%ect to his doing so& /e granted per#ission and heard argu#ent on the#. They are )i, /hether the li#its i#posed on TridentEs right to rely on a clause e8cluding any re#edy for #isrepresentation are i#posed by *this -ct+& that is& the 6nfair !ontract Ter#s -ct itself& or by the Misrepresentation -ct 1345 R and )ii, /hether any liability for #isrepresentation in this case is a liability arising *under a contract+ /ithin the #eaning of section 24)1, . Since these Cuestions relate to the applicability of section 24 as a /hole& it is con$enient to consider the# first. Li#its on the e8clusion of liability for #isrepresentation 12. Li#its on a partyEs /ere first po/er to li#it by his liability : of for the

#isrepresentation as follo/s: *(f any

i#posed

section

Misrepresentation -ct 1345 & /hich& as originally enacted& pro$ided

agree#ent

)/hether

#ade

before

or

after

the

co##ence#ent of this -ct, contains a pro$ision /hich /ould e8clude or restrictS )a, any liability to /hich a party to a contract #ay be sub%ect by reason of any #isrepresentation #ade by hi# before the contract /as #adeR or

)b, any re#edy a$ailable to another party to the contract by reason of such a #isrepresentation that pro$ision shall be of no effect e8cept to the e8tent )if any, that& in any proceedings arising out of the contract& the court or arbitrator #ay allo/ reliance on it as being fair and reasonable in the circu#stances of the case.+ .o e8ception /as #ade for international supply contracts or contracts of any other kind. 1: By section A of the 6nfair !ontract Ter#s -ct the follo/ing /as substituted for section : : *(f a contract contains a ter# /hich /ould e8clude or restrictS)a, any liability to /hich a party to a contract #ay be sub%ect by reason of any #isrepresentation #ade by hi# before the contract /as #adeR or )b, any re#edy a$ailable to another party to the contract by reason of such #isrepresentation that ter# shall be of no effect e8cept in so far as it satisfies the reCuire#ent of reasonableness as stated in section 11)1, of the 6nfair !ontract Ter#s -ct 1355 R and it is for those clai#ing that the ter# satisfies that reCuire#ent to sho/ that it does.+ 1=. >n the face of it the purpose of section A /as to bring the la/ relating to the e8clusion of liability for #isrepresentation into line /ith the la/ relating to the e8clusion of liability for breach of contract by sub%ecting both to the reCuire#ent of reasonableness introduced for the first ti#e by the 6nfair !ontract Ter#s -ct . -gain& ho/e$er& no special pro$ision /as #ade in the ne/ section : of the Misrepresentation -ct for international supply contracts. 1?. Section 24)1, of the 6nfair !ontract Ter#s -ct begins /ith the

/ords *The li#its i#posed by this -ct K+. Mr. Tickery sub#itted that the li#its on a partyEs ability to restrict liability for #isrepresentation are not i#posed by the 6nfair !ontract Ter#s -ct itself& but by section : of the Misrepresentation -ct 1345 & not/ithstanding that that section o/es its origin to section A of the for#er -ct. Mr. Mc'herson sub#itted& on the other hand& that the source of the li#it is section A itself. 14. (n #y $ie/ the ans/er to this Cuestion is to be found not by concentrating si#ply on the /ords *under this -ct+ in section 24)1, &but by looking at the /ording of subsections )1, and )2, of section 24 as a /hole. Subsection )1, is directed to e8cluding or restricting liability by reference to contract ter#s in general and is not li#ited to liability for breach of contract. -s such it is capable of e8tending to liability for #isrepresentation. Subsection )2, is also /orded generally& being capable of e8tending to any contract /hich contains ter#s purporting to e8clude liability and e8cluding fro# the reCuire#ent of reasonableness any contract falling /ithin subsection ):, . (n #y $ie/& therefore& /hen subsection )1, speaks of *the li#its i#posed by this -ct on the e8tent to /hich a person #ay e8clude or restrict liability by reference to a contract ter#+ it is referring to the reCuire#ent of reasonableness e#bodied in the -ct and& by operation of section A & to ter#s e8cluding liability for #isrepresentation. 15. (n #y $ie/ this interpretation is also to be preferred as gi$ing effect to the policy of e8cluding international supply contracts fro# this type of statutory control. Mr. Tickery pointed out that in its original for# section : of the Misrepresentation -ct did not e8clude such contracts fro# its operation and sub#itted that there is nothing in the legislati$e background to the 6nfair !ontract Ter#s -ct to suggest that 'arlia#ent intended a significant change in policy. That #ay be so& but the t/o reports of the La/ !o##ission

relating to e8e#ption clauses in contracts published in July 1343 and -ugust 135? both e8plicitly recognise that there are sound policy reasons for e8cluding contracts for the international supply of goods fro# the scope of any statutory controls. -s the La/ !o##ission recognised in its first report& there is a close link bet/een #isrepresentation and #any kinds of breach of contract& #ost clearly in the case of a contract for sale by description. -gainst that background to introduce by legislation a distinction in relation to such contracts bet/een clauses e8cluding liability for breach of contract and clauses e8cluding liability for #isrepresentation /ould create an ano#aly /hich cannot be %ustified on any discernible grounds. ( a# satisfied that the purpose of section 24 /as& as the language of subsection )2, indicates& to e8clude such contracts altogether fro# the reCuire#ent of reasonableness and that insofar as that in$ol$ed a liberalisation of the pre$ious position in relation to clauses e8cluding liability for #isrepresentation it reflects 'arlia#entEs intention to e8clude international supply contracts fro# this kind of statutory control. 1A >ne can also e8a#ine this Cuestion fro# the perspecti$e of the Misrepresentation -ct . (t #ight ha$e been& but /as not& argued in this case that section : of the Misrepresentation -ct is independent of the 6nfair !ontract Ter#s -ct & sa$e for i#porting the reCuire#ent of reasonableness set out in section 11 . That is& in effect& %ust another /ay of saying that the li#it on a partyEs right to e8clude or restrict liability for #isrepresentation is i#posed by the Misrepresentation -ct rather than by the 6nfair !ontract Ter#s -ct . (f it /ere correct it /ould #ean that all contracts& including those falling /ithin section 24):, & are sub%ect to the statutory controls i#posed by the Misrepresentation -ct . 13 The %udge proceeded on the unspoken assu#ption that if the leases /ere e8cluded fro# the operation of the 6nfair !ontract

Ter#s -ct they necessarily satisfied the )non-e8istent, reCuire#ent of reasonableness and so /ere effecti$e in accordance /ith their ter#s. (n #y $ie/ he /as right to do so. -t the heart of this proble# lies the relationship bet/een these t/o statutory pro$isions. To treat section : of the Misrepresentation -ct as independent of the 6nfair !ontract Ter#s -ct /ould in #y $ie/ create the ano#aly to /hich ( referred earlier and /ould frustrate the intention of 'arlia#ent to e8clude international supply contracts fro# the statutory controls. Since section : is /orded in ter#s /hich render an e8clusion clause ineffecti$e unless it co#plies /ith the controls set out in the 6nfair !ontract Ter#s -ct & it #akes the latter the controlling instru#ent. (n #y $ie/& therefore& it cannot be right to treat the Misrepresentation -ct as i#posing restrictions in a case in /hich the 6nfair !ontract Ter#s -ct pro$ides none. 2I Dor these reasons ( a# unable to accept this part of Mr. TickeryEs argu#ent. Liability under or outside the contractV 21 Mr. Tickery sub#itted that liability for #isrepresentation arises outside rather than under a contract and so does not fall /ithin the /ords *liability arising under such a contract as is described in subsection ):, belo/+ in section 24)1, . Mr. Mc'herson& /hile ackno/ledging that in this conte8t a #isrepresentation #ust& if it is to gi$e rise to a re#edy& occur prior to the for#ation of a contract& sub#itted that the re#edy& /hether in the for# of da#ages or rescission& is so closely linked to the contract that it can properly be described as a liability arising under it. 22 (n support of his sub#issions Mr. Mc'herson dre/ our attention to a nu#ber of decisions relating to the construction of %urisdiction and arbitration clauses in /hich the courts ha$e been /illing to gi$e a generous interpretation to /ords of a si#ilar kind. (n cases /here

parties ha$e agreed to refer disputes to arbitration or to the decision of the courts of a specific country there are strong reasons for thinking that they are unlikely to ha$e intended that disputes that differ only in their %urisprudential nature should be deter#ined by different tribunals. Thus in Diona Trust P 9olding !orporation $ 'ri$alo$ M2II5N 6B9L =I& M2II5N = -ll 7.R. 3?1 the 9ouse of Lords held that a clai# to rescind a contract by reason of bribery fell /ithin the scope of an arbitration clause under /hich the parties had agreed to refer to arbitration *any dispute arising under this charter+. (t #ay be said that the decision& turning as it does on the construction of a co##ercial agree#ent& is an uncertain guide to the interpretation of a statute& since 'arlia#ent& /hich can be presu#ed to ha$e chosen its /ords carefully& could easily ha$e used language that /ould enco#pass clai#s based on causes of action that are related to& but do not arise under& a contract. The e8pression *under or in connection /ith+ i##ediately co#es to #ind. 9o/e$er& as in the case of a co##ercial contract& so#e assistance is to be gained fro# identifying the purpose of the pro$ision in Cuestion. Dor the reasons ( ha$e already gi$en& ( think that the purpose of section 24 as a /hole is to e8clude international supply contracts fro# the statutory regi#e go$erning e8clusion clauses. (f that is right& there is e$ery reason to interpret the e8pression *liability arising under such a contract+ as e8tending both to liability for da#ages for #isrepresentation and to the right of the in%ured party to rescind the contract /here that re#ains possible. 2:. Since preparing this %udg#ent ( ha$e had the benefit of reading in draft the %udg#ent of -rden L.J. ( a# grateful to her for dra/ing attention to the language of section 1:)1,)b, of the -ct /hich pro$ides further support for that conclusion. 2= -ccordingly& ( a# unable to accept this part of Mr. TickeryEs

argu#ent. -re the leases international supply contractsV 2? 9a$ing dealt /ith Mr. TickeryEs t/o ne/ points& ( can no/ turn to the re#ainder of section 24 . The leases pro$ided for possession of the aircraft to pass under the# and /ere #ade by parties /hose places of business /ere in the territories of different states. They therefore satisfy the reCuire#ents of subsection ):, . 9o/e$er& all the negotiations appear to ha$e been carried on in this country and the leases /ere e8ecuted here. They pro$ided for deli$ery in this country. They do not& therefore& satisfy the reCuire#ents of subsections )=,)b, or )c, . That lea$es only subsection =)a, . 24 The %udge held that subsection )=,)a, is satisfied if& at the ti#e of the conclusion of the contract& the goods in Cuestion /ill be carried fro# the territory of one state to the territory of another. 9e did not discuss the rationale behind the subsection& but& as far as one can tell& he appears to ha$e accepted that it /ould be satisfied in any case in /hich the parties conte#plated that the goods /ould be transported across national boundaries. (n support of his conclusion he relied on the decision of Mance L.J. in -#iri Dlight -uthority $ B-7 Syste#s 'lc M2II:N 7@!- !i$ 1==5& M2II=N 1 -ll 7.R. )!o##, :A? . 25 Mr. Tickery sub#itted that the leases in the present case do not fall outside the scope of the -ct because they pro$ide for deli$ery to take place in the 6nited Bingdo# and #ake no pro$ision for the aircraft to be transported to another country. The position is therefore essentially the sa#e as it /ould be if the lessees had carried on business in this country and neither party had conte#plated that the aircraft /ould be operated fro# abroad. (n support of his argu#ent he dre/ our attention to the legislati$e history of the statutory control of e8clusion clauses fro# the

6nifor# La/s on (nternational Sales -ct 1345 to the 6nfair !ontract Ter#s -ct itself. 9e also dre/ our attention to $arious Reports published by the La/ !o##ission on this sub%ect& cul#inating in the La/ !o##ission Report on 6nfair Ter#s in !ontracts published in Debruary 2II?. 2A (nteresting though this #aterial is& it does not shed a great deal of light on 'arlia#entEs intention in enacting subsection )=,)a, and ( do not think ( a# alone in finding it difficult to construe. -t first sight the phrase *at the ti#e of the conclusion of the contract+ appears to go$ern both *in the course of carriage+ and */ill be carried+& but ( doubt /hether that is /hat the drafts#an intended. There is an ob$ious gra##atical a/k/ardness about the e8pression *the goods in Cuestion K at the ti#e of the conclusion of the contract K /ill be carried+ /hich leads #e to think that he probably intended to refer separately to goods in the course of carriage at the ti#e the contract is #ade and goods that /ill be carried at a later date. .onetheless& the e8pression */ill be carried+ looks for/ard and can only do so fro# the point of ti#e at /hich the contract is #ade. >n the face of it& therefore& subsection =)a, appears to be directed to any case in /hich the parties conte#plate at the ti#e of entering into the contract that the goods in Cuestion /ill be transported across national boundaries& not necessarily in order to fulfil the ter#s of the contract& but in order to achie$e its co##ercial ob%ect. (n #y $ie/ if a person /ho carries on business abroad hires eCuip#ent fro# a supplier in this country in circu#stances /here both kno/ that the intention is for it to be used abroad& the lease is one pursuant to /hich the goods /ill be carried fro# the territory of one State to the territory of another /ithin the #eaning of section 24)=,)a, and can sensibly be described as an international supply contract. 23 !o##enting on section 24)=, generally& Mance L.J. in -#iri

Dlight -uthority $ B-7 Syste#s had this to say: *The structure of s.24)=, is on any $ie/ Cuestionable. S.24)=,)a, can in reality only be significant in a case /here the offer and acceptance /ere done in one and the sa#e state. (n other /ords& it can like s.24)=,)c, only #atter in such a case. Let the drafts#an does not appear to ha$e appreciated that. The relationship bet/een s.24)=,)a, and )c, #ay /ell not therefore ha$e been /orked out co#pletely. 9o/e$er& the drafts#an #ust at least be taken to ha$e had in #ind that s.24)=,)a, is only concerned /ith goods /hich are being& or /ill be& carried bet/een the territory of t/o different states. S.24)=,)a, does not therefore reCuire the seller to ha$e undertaken any obligation to deli$er to any other state. @ithout going into its precise li#its& one classical e8a#ple /ithin s.24)=,)a, /ould be the sale of goods on !(D or D>B ter#s. The supplier thereby undertakes to ship goods& or to gi$e the recei$er the benefit of a shipping contract& /ithout undertaking that the goods /ill actually be deli$ered by the carrier to their o$erseas destination. @hen the drafts#an ca#e to consider the circu#stances in /hich a contract #ade in one state should be treated as international& he #ay ha$e thought that the trigger should also in$ol$e #o$e#ent bet/een different states. So far as the relationship bet/een s.24)=, )a, and )c, is concerned& the latter is& in contrast to the for#er& concerned on its face solely /ith circu#stances in /hich the supplier does undertake a deli$ery obligation.+

:I Dor the reasons ( ha$e gi$en ( respectfully agree /ith that analysis. :1 Bal#oral 1roup Ltd $ Borealis )6B, Ltd M2II?N 7@9! 13II )!o##,& M2II4N 2 LloydEs Rep. 423 concerned the supply of a co##odity kno/n as borocene by Borealis to Bal#oral. The goods

/ere produced in .or/ay and shipped to the 6nited Bingdo# for sale and deli$ery to the clai#ant& but in so#e cases the goods had already been shipped to this country fro# .or/ay /hen the contract /as #ade and /ere already lying in a /arehouse here. The Cuestion therefore arose /hether in those cases the contract fell /ithin subsection )=,)a, . !hristopher !larke J. held that since the goods in Cuestion /ere produced to order and not supplied fro# e8isting stock& they should be regarded as being in the course of carriage fro# .or/ay to the 6nited Bingdo#& the course of carriage ha$ing been te#porarily interrupted /hile they /ere in the /arehouse. :2 (n the present case it is clear that& although the aircraft /ere to be deli$ered to the lessee in this country& both parties /ere /ell a/are that they /ere being leased by Dirst Dlight for use in their business and /ere to be taken to (ndia for that purpose. (f& therefore& as its language suggests& subsection )=,)a, is not li#ited to contracts under /hich goods #ust be carried across national boundaries in order to fulfil a contractual obligation& a contract of this kind #ust fall /ithin it. .ot/ithstanding the doubts e8pressed by To#linson J. at first instance in -#iri Dlight -uthority $ B-7 Syste#s M2II2N 7@9! 2A=1 )!o##,& M2II:N 1 LloydEs Rep. ?I at page 41& col. 2& ( a# not persuaded that the subsection is incapable of applying to ships& aircraft and other $ehicles capable of #o$ing under their o/n po/er. 78cept for larger-siQed $essels& $ehicles of that kind can be& and often are& carried by sea and air& but ( re%ect the argu#ent pri#arily because ( a# unable to accept that 'arlia#ent intended to dra/ a distinction for this purpose bet/een $ehicles capable of #o$ing under their o/n po/er and other goods. (n #y $ie/ the aircraft in this case /ere to be *carried+ fro# the 6nited Bingdo# to (ndia /ithin the #eaning of subsection =)a, & despite the fact that it /as the intention of Dirst Dlight to fly the#

under their o/n po/er. :: Dor these reasons ( a# satisfied that the leases in this case fall /ithin section 24)=,)a, and are therefore e8cluded fro# the pro$isions of the -ct altogether. (t follo/s that in #y $ie/ the %udgeEs decision /as correct and that the appeal should be dis#issed. Lady Justice -rden: := ( agree /ith the %udg#ent of #y Lord& Lord Justice Moore-Bick. (n particular ( agree /ith hi# that the statutory purpose of section 24 of the 6nfair !ontract Ter#s -ct 1355 )*the 1355 -ct+, is to e8clude international supply contracts fro# the controls on e8e#ption and other clauses pro$ided for in 'art 1 of that -ct. This is e#phasised by section 1)2, of the 1355 -ct& /hich pro$ides that 'art 1 of the 1355 -ct *is sub%ect to 'art ((( of the -ct+. )That 'art contains section 24 ., Those /ords in section 1)2, create a default rule that 'art ((( should ha$e pri#acy o$er 'art ( )unless the contrary appears,& and gi$e additional /eight to the pro$isions of sections 24)1, and )2, . :? -s to the Cuestion /hether the /ords *liability arising under+ an international supply contract include the right to rescind a contract for #isrepresentation& s 1: in 'art ( of the 1355 -ct supports Lord Justice Moore-BickEs conclusion. The opening /ords of section 24)1, )*The li#its i#posed by this -ct on the e8tent to /hich a person #ay e8clude or restrict liability by reference to a contract ter#+, #ust bear the #eaning gi$en to the# by 'art ( of the 1355 -ct /here those li#its appear& and section 1: gi$es those /ords an e8tended #eaning as e8cluding any right or re#edy in respect of a liability. The second reference in section 24)1, to *liability+ )*liability arising under+ an international supply contract, #ust be construed accordingly.

:4 - conclusion contrary to that of Lord Justice Moore-Bick& na#ely a conclusion that liability for #isrepresentation cannot be restricted or e8cluded by the parties to an international supply contract& /ould create a trap for the un/ary. (t /ould& as #y Lord has said& also produce the unlikely result that parties to an international supply contract could e8clude liability& for e8a#ple& for the supply of goods that are not fit for the purpose under section 4):, & but not liability for #isrepresentation. :5 Dor these reasons and those gi$en by #y Lord& ( agree that the appeal should be dis#issed.

Alexander Trukhtanov Misrepresentation: defence L!"!#! $%%&' ($5)*ct+' ,-. ,/% MDootnotes ha$e been o#ittedN M( ha$e supplied paragraph nu#bers for ease of e8positionN 1. @hen in 13AI Bro/ne-@ilkinson J. held that /hat he found at the ti#e to be a standard entire agree#ent clause co##only used by solicitors could not on its ter#s gi$e a defence to a clai# in #isrepresentation& he suggested an alternati$e in the for# of *a clause ackno/ledging that the parties had not relied on any representations in entering into the contract+. 9e did not go into discussing e8actly ho/ this alternati$e /ould /ork and /as only concerned to #ake the point that reliance on a representation /as acknowledgement of non reliance as

different fro# agree#ent on a /arranty& /ith the result that the standard clause stating that the contract */as the entire agree#ent and understanding bet/een the parties+ only e8cluded collateral /arranties but not representations. The suggestion /as dutifully taken up by practitioners but& al#ost t/o decades later& after ackno/ledg#ent of non-reliance clauses had the#sel$es beco#e a co##on for# of contractual pro$ision& they /ere dealt a se$ere blo/ by re#arks #ade by !had/ick L.J. sitting in the !ourt of -ppeal in 7- 1ri#stead P Son Ltd $ Mc1arrigan 7lectronics Ltd $ Sanderson !DL Ltd. and @atford he -pplying a #uch earlier

decision of the !ourt of -ppeal in Lo/e $ Lo#bank Ltd&

concluded that such clauses had to be treated as representations of non-reliance and /ere only potentially capable of raising an estoppel by representation. That estoppel /as /hat he called *e$idential+& in that it /ould not be raised unless the party pleading estoppel sho/ed on the e$idence that it had in actual fact been induced by and had relied on the ackno/ledg#ent. This denied to non-reliance clauses the effect of an ordinary contractual ter# and #eant that /hat at first glance appeared to be a ter# of contract by $irtue of being part of the ad#itted /ritten record of that contractEs ter#s /ould not ha$e any effect unless induce#ent and reliance /ere sho/n. 2. Such position continued for another decade until the 9igh !ourt decisions in J' Morgan !hase $ Spring/ell .a$igation !orp and Trident Turboprop )"ublin, Ltd $ Dirst Dlight !ouriers Ltd de$eloped a line of reasoning opened by the !ourt of -ppeal decision in 'eekay (nter#ark Ltd $ -ustralia and .e/ 0ealand Banking 1roup Ltd and held that a pro$ision fra#ed as an ackno/ledg#ent of nonreliance could after all take effect as a contractual ter# and raise an estoppel of itself& /ithout the need to sho/ anything beyond an agree#ent on the #atter.

:. 7T>L6T(>.S >D !-S7 L-@ The drafting techniCue de$eloped on the suggestion of Bro/ne@ilkinson J. /orks as an ackno/ledge#ent by the recipient of a representation that he had not relied on that representation )and so#eti#es that he had recei$ed none altogether,. The techniCue operates not by /ay of release of #isrepresentor fro# liability but by disclai#ing the e8istence of factual basis for liability in the for# of an untrue state#ent on /hich the recipient placed reliance. (n circu#stances /here the purportedly e8cluded factual basis for liability does actually e8ist to the kno/ledge of the liable party--i.e. /here a #isrepresentation had in fact been #ade and relied uponan ackno/ledg#ent of non-reliance flatly contradicts actual reality. =. Lo/e $ Lo#bank Lo/e /as a case of a patent such contradiction /hich the court refused to sto#ach. Sellers of an unroad/orthy second-hand car e8tracted fro# a consu#er purchaser an ackno/ledg#ent that the purpose for /hich the car /as purchased had not been #ade kno/n to the# and a further ackno/ledg#ent of satisfactory order and condition of the car on deli$ery. -n atte#pt to plead those ackno/ledg#ents at trial to a$oid liability for the defects in the car failed spectacularly. (t /as the second ackno/ledg#ent& put in a receipt signed by the purchaser at the ti#e of deli$ery& on /hich counsel sought to raise an estoppel. That ga$e occasion to the court to deli$er /hat has beco#e a classical for#ula: in order to found an estoppel on an ackno/ledg#ent of fact: )1, the ackno/ledg#ent #ust a be clear and una#biguous state#ent& )2, the party #aking the state#ent #ust ha$e intended that the state#ent should be acted upon or beha$ed in such a /ay as to create the i#pression of such intention and ):, the recipient of the state#ent #ust ha$e actually belie$ed in the truth of the state#ent and #ust ha$e been

induced by that belief to act upon it. >n the facts none of the three li#bs /as #et. (t /as si#ply not the case that the sellers acted on a genuine belief in /hat /as said in the receipt. The reasoning in relation to the third li#b /as notably e8pressed in rather farreaching ter#sR it suggested that /here the ackno/ledg#ent is #ade at the sa#e ti#e as the e8ecution of the contract )a fortiori /hen it is #ade after the contract had been #ade& as /as found to be the case on the facts, there is no *further action apart fro# /hat they are already contractually bound to do+ that the sellers could ha$e taken in reliance on the ackno/ledg#ent. That left no roo# for the possibility& going for/ard& that the agree#ent itself #ight be seen as #ade in reliance on the truth of the ackno/ledg#ent. ?. - reCuire#ent for an act of reliance o$er and abo$e the #aking of an agree#ent ca#e on the heels of the reasoning that had been applied to the first ackno/ledg#ent. There /as no atte#pt to raise an estoppel on it because it /as ob$iously i#possible to assert that the sellers /ere not actually a/are that the car /as being bought as a #eans of transport. !ounsel for the sellers in$oked the fact that the ackno/ledg#ent /as found in a special clause in the hirepurchase contract& and argued that this #eant it /as a ter# of the contract and operated as a contractual agree#ent. This argu#ent /as #et /ith a stern rebuke fro# the court. The inclusion of ackno/ledg#ent as a clause in the contract /as dis#issed as a #ere circu#stance and the status of a contractual pro#ise /as denied to an ackno/ledg#ent of that sort as a #atter of principle. To call the ackno/ledg#ent an agree#ent& it /as said& *cannot con$ert a state#ent as to past facts& kno/n by both parties to be untrue& into a contractual obligation+. 4. - contractual obligation could e8ist in the for# of a pro#ise that *acts e8ist at the ti#e of the pro#ise or /ill e8ist in the future+& but an *agree#ent+ as to so#ething done in the past could only be a

representation& and not a contractual pro#ise. (t /as only capable of raising an estoppel& and if estoppel /ere in fact to be raised& induce#ent and reliance on the representation had to be sho/n on the e$idenceR gi$en the ad#ission of counsel that there /as no e$idence to support an estoppel& the ackno/ledg#ent si#ply had no effect. 5. This reasoning /as an o$erkill dri$en by consu#er protection senti#ent. The court so#eho/ felt the need to sho/ the ineffecti$eness of both ackno/ledg#ents on their o/n ter#s before deli$ering a strongly /orded policy-based decision that they /ere in truth designed to allo/ the sellers to e$ade the fitness-for-purpose pro$isions of the 9ire-'urchase true basis for the decision. A. 7$idential estoppel Dollo/ing -l#an& the techniCue that failed in Lo/e found a /idespread use in the /orld of co##ercial contracts. (t is unlikely that the legal profession appreciated the i#plications of Lo/e /hen it took up the suggestion #ade in -l#an. That suggestion /as #ade in the conte8t of an entire agree#ent clause in /hich the e8pression *entire agree#ent and understanding+ /as held to supersede collateral /arranties but not representations. (t /as natural in this conte8t that the in$itation of Bro/ne-@ilkinson J. /as taken up in the e8pectation that an ackno/ledg#ent of non-reliance /ould ha$e the sa#e effect on collateral representations as the original clause already had on collateral /arranties. (t /ould ha$e appeared to be si#ply a #atter of finding the right /ords to e8tend the standard entire agree#ent clause& as a #atter of interpretation& to representations. 3. By the 133Is ackno/ledg#ents of non-reliance beca#e a -ct 13:A and had to fail for that reason. (t /ould be a long ti#e before this /as recognised as the

standard feature of co##ercial contracts& as part of a properly drafted entire agree#ent clause& and so it #ust ha$e been Cuite a surprise /hen in Tho#as @itter Jacob J. e8pressed the $ie/& as an acade#ic point& that a standard for# of ackno/ledg#ent /as not sufficiently e8plicit to preclude the representee fro# sho/ing actual reliance on a representation /hich the ackno/ledg#ent purported to e8clude. @hen the point ca#e to be considered in the !ourt of -ppeal& !had/ick L.J.& initially in 1ri#stead and thereafter in @atford 7lectronics& spoke )also obiter, in support of the use of non-reliance clauses. 9e %ustified his inter$ention by in$oking the partiesE desire for co##ercial certainty. That certainty /as to be achie$ed by the parties arranging their affairs on the basis that their /ritten contract records all the ter#s of their bargain. This supposedly benign inter$ention took the for# of a proposition that ackno/ledg#ent of non-reliance /as capable of operating by /ay of e$idential estoppel--indeed& that this /as the *proper use of an ackno/ledg#ent of this nature+. The %udge put special e#phasis on the fact that this /as no #ore than a potential effect of the pro$ision )and its only possible effect,R to set up an e$idential estoppel the party had to sho/ on the e$idence that the three Lo/e reCuire#ents /ere satisfied. 1I. The e8act reasoning of !had/ick L.J. #erits closer e8a#ination because it tends to de#onstrate ho/ #uch he /as taken by the approach in Lo/e e$en against his o/n natural instincts. (n @atford 7lectronics his Lordship /as considering /hether a pro$ision /hich e8cluded liability for conseCuential losses could e8clude liability in #isrepresentation. 9e #ade the ackno/ledg#ent of non-reliance a peg on /hich to hang his analysis of that pro$ision: *MThe conseCuential losses pro$isionN has to be construed on the basis that the parties intend that their /hole agree#ent is to be contained or incorporated in the docu#ent /hich they ha$e signed

and on the basis that neither party has relied on any pre-contract representation /hen signing that docu#ent.+ 1I. (f so& the reasoning /ent& then on its true construction& the conseCuential losses pro$ision could not ha$e been intended to e8clude liability for #isrepresentation. 'resence of a clause ackno/ledging absence of reliance on representations attested to the fact that the parties thought that the liability could ne$er arise in the first place. 9ence& there /as no need to e8clude it. Taken on its o/n& this reading of the conseCuential loss pro$ision is only consistent /ith the %udge accepting as conclusi$e the ter#s of the ackno/ledg#ent clause )/hich state that there is no reliance and therefore lea$e no roo# for liability in #isrepresentation, and applying this part of the partiesE contract as a tool to disco$ering the true #eaning of the other part of that contract. Let the %udgeEs analysis of the ackno/ledge#ent clause itself contradicts that conclusion. (n the paragraphs of his %udg#ent i##ediately preceding his interpretation of the conseCuential losses pro$ision& !had/ick L.J. said that the non-reliance clause /ould only be effecti$e if it /ere set up as e$idential estoppel. 9e openly ackno/ledged that satisfying the induce#ent and reliance tests *#ay present insuperable difficulties+ since it reCuires that a party /ho #ade representations to the other in order to induce the other to #ake the contract #ust sho/ that he /as hi#self induced to enter into the contract by the other ackno/ledging that he had not relied on the representations. The use of #odality is& to put it #ildly& so#e/hat of an understate#ent. 11. To secure a contract by intending to induce and actually inducing another and at the sa#e ti#e genuinely to belie$e and rely on that other saying that he is not so induced reCuires an i#possible feat of doublethink. That !had/ick L.J. hi#self felt the need to #ake a special apology for applying the non-reliance clause

to construe the conseCuential losses pro$ision /ithout testing the clause on the e$idence is re$ealingR it sho/s recognition that the test is self-fulfilling and is an ad#ission that his decision rested on a purely theoretical effect of the clause. The intention in @atford 7lectronics #ight ha$e /ell been to gi$e a life support to nonreliance clausesR instead& the decision took all $itality out of the#. 12. (t see#s reasonably clear that reCuiring& i#possibly&

de#onstration of actual induce#ent and reliance on a non-reliance clause brings about a result /hich *flouts business co##on sense+. There /as a#ple opportunity in @atford 7lectronics to a$oid that result by in$oking the %udg#ents in the by then decided cases of Mannai and (n$estor !o#pensation Sche#e to construe the nonreliance clause in accordance /ith a #ore realistic approach& yet the recei$ed /isdo# of Lo/e /as follo/ed e$en though its application $ery ob$iously frustrated the business e8pectations of the parties. (t took a sleight of hand to sa$e the decision on the #erits in @atford 7lectronics fro# the sa#e fate. 1:. The true #oti$ation for inclusion of non-reliance language in co##ercial contracts is an open secretR it /as recognised in Lo/e itself--there the sellers /ere found to ha$e relied not on a genuine belief that the purchaser in fact accepted the car to her satisfaction but on a belief that the particular for# of clause they had inserted into the contract /ould enable the# to escape the application of the 9ire-'urchase -ct 13:A. This #oti$e /as unacceptable in the consu#er protection conte8t of Lo/e. !had/ick L.J. decided that in the conte8t of the cases before hi# the non-reliance clauses /ere part of a deal struck bet/een professionally ad$ised e8perienced parties of eCual bargaining po/er. (t follo/s that there /as no si#ilar i#perati$e not to gi$e effect to the partiesE real intentions but a proper in$estigation of those intentions /as i#possible under the Lo/e strictures /hich forbade the analysis of the

ackno/ledg#ents other/ise than as representations of fact. The court follo/ed the general attitude& entrenched by the ti#e of 1ri#stead and @atford 7lectronics& that Lo/e /as the only possible /ay to analyse non-reliance clauses. 1=. !ontractual estoppel - turning point ca#e in the /ake of financial crises of the late 133Is& /hen clients of in$est#ent banks sought to recoup losses suffered by the# on their in$est#ents in e#erging #arkets debt. "isappointed clients sought to assert that the bankers #issold the in$est#ents to the# and /ere liable in #isrepresentation. The banks relied on standard banking disclai#ers to a$oid liability. Those disclai#ers typically in$ite the custo#er to #ake sure he understands the nature of in$est#ents and elicit an assurance that the custo#er is a/are of the risks of in$esting and accepts the#. @hen they ca#e to be considered in 'eekay counsel #ade a sub#ission that the clai#ant /as estopped *by its signature+ of the disclai#ers fro# alleging induce#ent by the defendant. 1=. (nas#uch as that sub#ission sought to raise an estoppel on nothing #ore than the signature of the disclai#ers& it ran against the pre$ailing attitude and #ight e$en ha$e been #ade /ith the encourage#ent of the court )a suspicion encouraged by the fact that the sub#ission /as only #ade during the hearing by /ay of a#end#ent of notice of appeal /ith the courtEs per#ission,. The !ourt of -ppeal accepted the sub#ission and held that& though capable of raising e$idential estoppel& the pri#ary effect of the disclai#ers /as to raise contractual estoppel. Moore-Bick L.J. said: *There is no reason in principle /hy parties to a contract should not agree that a certain state of affairs should for# the basis for the transaction& /hether it be the case or not K @here the parties e8press an agree#ent of that kind in a contractual docu#ent

neither can subseCuently deny the e8istence of the facts and #atters upon /hich they ha$e agreed K The contract itself gi$es rise to an estoppel.+ 1?. (#portantly& /hat raises the estoppel is not a representation of fact /hich induced the representee to rely upon it. (t is the contract itself. (t is the agree#ent /hich he #ade accepting a certain state of fact that denies to a litigant the opportunity to sho/ that the real state of facts /as different fro# that stated in the agree#ent. 14. -s an earlier e8a#ple of this kind of estoppel the court referred to estoppel that had been raised in !olchester B! $ S#ith. There a dispute arose out of a lease of land /hich /as #ade by /ay of settle#ent of an ad$erse possession clai# and included an ackno/ledg#ent by the tenant that he had not gained any right or title against the landlord by ad$erse possession. The !ourt of -ppeal held that the tenant /as estopped fro# asserting his ad$erse possession clai# in the face of the ackno/ledg#entR the decision /as put on the narro/ foundation of a public policy principle that it is in the interests of ad#inistration of %ustice for bona fide co#pro#ise agree#ents to be enforced as binding agree#ents. The principle& together /ith the proposition that its application e8tended to Jagree#ents /here /hat /as being co#pro#ised /as a dispute of fact& /as taken fro# the decision in Binder $ -lachouQos /hich held that a bona fide co#pro#ise of a Cuestion of fact /as binding and could not be reopened. Dor our purposes& and )it /ould be natural to e8pect, for the purposes of the !ourt of -ppeal in 'eekay& the /ider reasoning of the court belo/ in S#ith is of far greater interest and i#portance. The trial %udge hi#self suggested the possibility of estoppel by con$ention but counsel chose instead to rely pri#arily on a *rare+ type of estoppel& gi$ing as authority this e8tract fro# a definiti$e reference /ork:

*- con$ention of the parties& /hich binds the# to adhere to an assu#ed state of facts& #ay a#ount to an e8press contract in /hich case each party contracts /ith the other to be estopped K there #ay be an estoppel /here the parties are precluded& as a #atter of contract& by $irtue of operati$e /ords and not those of a #ere recital& fro# setting up a $ersion of the facts different fro# that /hich they ha$e agreed to assu#e.+ 15. The decision of the !ourt of -ppeal in Burroughs -dding Machine Ltd $ -spinall /as gi$en as an e8a#ple. There an agree#ent pro$ided that if a state#ent of account gi$en to a sales#an /as not ob%ected to /ithin :I days of receipt& the account /ould be *dee#ed to be accepted by the sales#an as correct& and shall be binding on hi# and taken to be an ;account stated and agreed+<. >n a counterclai# by the sales#an for co##issions in e8cess of those paid to hi# pursuant to earlier state#ents of account to /hich he had not ob%ected& the court held that as a #atter of true construction of the agree#ent the state#ents /ere conclusi$e against the sales#an. The %udg#ents in the case did not specifically address reference in the dee#ing clause to *account stated and agreed+ but it is of so#e interest. -n account stated is *#ere e$idence establishing pri#a facie liability+ /hich is not conclusi$e against the debtor but is open to rebuttal by contradicting e$idenceR an account agreed is an actual debt enforceable by action. The decision in -spinall sho/s& as a #atter of principle& that a dee#ing clause can operate to bind the parties to a conclusi$e resolution of a #atter /hich /ould other/ise be open to be e8a#ined on the e$idence. (n the course of argu#ent before the trial %udge in S#ith counsel sought to argue )/ithout citing Lo/e but in fact e8actly follo/ing the reasoning there, that -spinall only allo/ed contractual estoppel to be raised by a pro$ision addressing future disputes or calculations and not one purporting to set out

past facts. The %udge refused to accept that contractual estoppel /as li#ited in this /ay and upheld the opposing counselEs sub#ission that estoppel arose si#ply because the parties ha$e contracted to be estopped. -nother e8a#ple of a pro$ision fitting into this #odel #ight be the decision in Bro/nlie $ !a#pbell /here the 9ouse of Lords held that a clai# in #isrepresentation /as defeated by a pro$ision in the contract to the effect that *the purchaser shall be held to ha$e satisfied hi#self+ as to the truth of the allegedly #isrepresented #atter. 1A. -lthough /hen the %udg#ent belo/ in S#ith /as affir#ed on appeal& an appellate %udge stated that it /as a *#atter of indifference+ /hether the estoppel /as labelled estoppel by agree#ent or by con$ention& the difference is substantial. 7stoppel by con$ention arises /here the facts fall short of a concluded agree#ent assu#ption and or its an facta probanda are a genuine by co##on one and assu#ption genuinely #ade

acCuiesced in by the other party& coupled /ith reliance on those assu#ptionsR this creates the *con$ention+. -n atte#pt to set up such estoppel on an ackno/ledg#ent of non-reliance is open to the sa#e e$idential difficulties as those /hich face a plea of estoppel by representation. There is also the difficulty that it is necessary to sho/ actions in the nature of a course of dealing& or at least conduct& pursued in reliance on the co##on belief& and /ith a typical non-reliance clause there is nothing beyond the #aking of the agree#ent of /hich it is part to sho/ any such conduct& /hich of itself is insufficient. Dro# this angle there indeed #ay be a si#ilarity bet/een estoppel by con$ention and contractual estoppel& in that ho/e$er #uch the parties #ay ha$e intended a certain result or belie$ed that it /ould follo/ fro# a certain for# of clause& they are bound to be disappointed if all they ha$e to sho/ for the supposed ter# is an agreed for# of /ords /hich& on their true

construction& are unable to support the result contended for. 13. Both kinds of estoppel /ill fail but they /ill fail for $ery different reasons: there /ill be no *con$ention+ to sho/ absent any conduct /hich relies on the #utual belief& and there /ill be no contract to sho/ /here agreed ter#s do not address the #atter. (ndifference to the distinction sho/n on appeal in S#ith can be traced back to the passage fro# Spencer Bo/er& cited in the %udg#ent belo/ in that case& /hich treated estoppel by contract as an instance of estoppel by con$ention that arose /here the con$ention happened to a#ount to contract. - #odern edition of the sa#e treatise proposes to re$erse the approach by gi$ing pri#acy to contractual analysis. @hene$er a#enable to such e8planation& cases of estoppel by con$ention are to be e8plained si#ply as cases of e8press or i#plied contractual undertakingsR that lea$es estoppel by con$ention properly so called to be raised by reliance /here no contract can be found. The central point is that estoppel by contract does not arise under the reliance doctrine /hich is the foundation for estoppel both by con$ention and representationR contrary to the $ie/ that /ould ha$e Lo/e control the raising of any for# of estoppel& this position recognises contractual estoppel as #erely a piece of procedural #achinery to the use of /hich a party is entitled si#ply by $irtue of a binding agree#ent. The position is /ell borne out by the decisions in -spinall & !a#pbell and S#ith itself& /hich proceed on the principle that /here a ter# of contract is found as a #atter of ob%ecti$e construction to constitute a binding agree#ent on a certain state of facts it /ill raise an estoppel of itself. Matters that are needed to raise an estoppel under reliance-based doctrines are not part of the doctrine underlying contractual estoppel. 2I. -fter a fe/ cases of application on the sidelines of the #ain argu#ent and Cuiet ackno/ledg#ent by reference /ork& the decision in 'eekay /as sub%ected to& and /ithstood& an e8hausti$e

analysis in the 9igh !ourt in the face of a co#prehensi$e attack on its effect both as a #atter of precedent and as a #atter of /hat it had actually decided. (n Spring/ell 1loster J. considered a cluster of standard banking /hich ter#s )e8pressed& the interchangeably& as representations& /arranties& ackno/ledg#ents& agree#ents and confir#ations, designated custo#er *sophisticated in$estor+& declared an e8ecution-only basis of the relationship and ackno/ledged that no in$est#ent ad$ice /as gi$en to or relied upon by the custo#er. The %udge applied 'eekay to hold that regardless of the specific for# of /ords used they /ere all ter#s of contract and raised contractual estoppel. She defended the estoppel-related reasoning in 'eekay fro# the charge that it /as stated obiter and held it to be part of the ratio of the case. She relied on the presence of !had/ick L.J. on the bench in 'eekay as e$idence that it /as not decided per incuria# of the Lo/e -1ri#stead -@atford 7lectronics line of authority. -s a #atter of substanti$e effect& 1loster J. re%ected sub#ission of counsel that 'eekay had to yield to Lo/e and that satisfaction of the three Lo/e probanda /ere necessary after all to raise a 'eekay -type contractual estoppel. The decision in Lo/e /as e8plained as a case of contractual ter#s that /ere repugnant to #andatory pro$isions of 9ire-'urchase -ct 13:A and /ere in truth a sha#. 21. The general proposition that an agree#ent on past facts could only take effect as a representation and could not ha$e effect as a /arranty /here to the kno/ledge of the parties its ter#s did not reflect reality /as accordingly held not to be part of the ratio in Lo/e . (n holding this& the %udge dre/ support fro# the decision in "eepak in /hich Ri8 L.J. treated that proposition as #ade *in a /holly different conte8t+ and refused to see */hy parties to a contract are not perfectly capable of agreeing /hat are and /hat are not the ter#s of any contract binding on the#+. The significance

of the decision in Spring/ell is that it recognised %udicially that 'eekay stood on its o/n and that estoppel by contract and estoppel by representation /ere different for#s of estoppel /ith different %urisprudential bases. The basis for estoppel by representation /as induce#ent and relianceR the basis for contractual estoppel /as the principle of *freedo# of contract and contractual certainty+ /hich allo/s the parties *to deter#ine the factual basis upon /hich they conduct business+ and treats the# as bound by such deter#ination& /ithout #ore. 22. >n the facts of Spring/ell& the disclai#ers /ere held to be *contractual representations )and& in so#e cases& /arranties, or *agree#ents+ as to the basis on /hich the business /as to be conducted+R an e8press finding by the %udge that the bank /as */ell a/are+ that& not/ithstanding those *agree#ents+& it had in fact gi$en in$est#ent ad$ice /as held to be no bar to estoppel raised by the#. 2:. The analysis in Spring/ell and recognition of contractual estoppel as a distinct species of estoppel /ere supported in a conte#poraneous case of Trident . -ikens J. agreed /ith 1loster J. and accepted the distinction bet/een the Lo/e e$idential estoppel and 'eekay contractual estoppel. Dollo/ing 'eekay& he recognised the partiesE freedo# to agree that there ha$e been& or shall be dee#ed to ha$e been& no representations e$en /here there had in fact been so#e& and the right of the parties to *base their contractual relations on that state of affairs+. 2=. 'R7S7.T '>S(T(>. @ith the decisions in Spring/ell and Trident & the tide has turned. -tte#pts to constrain the application of contractual estoppel by Lo/e %urisprudence are no longer entitled to succeed. @hat re#ains& though& is the difficulty& apparent fro# the cases& of

deter#ining /hether the pro$ision in Cuestion raises a contractual estoppel or is #erely capable of raising an e$idential estoppel. ReCuire#ents /hich need to be satisfied in order to set up an estoppel-based defence to a clai# in #isrepresentation are deter#ined by the kind of estoppel that is sought to be raised& /hich in turn is deter#ined by characterisation of the state#ent pleaded in defence. 2?. 'roble#s of characterisation The cases decided so far ha$e dealt /ith a host of $arious for#s of state#ents. (n Trident the pro$ision /as fra#ed as a straightfor/ard dee#ing clause. (n 'eekay the pro$isions /ere in the for# of state#ents of ad$ice and assu#ptions. (n Spring/ell there /as an assort#ent of ter#s /hich co#bined ackno/ledg#ents of non-reliance and non-receipt of ad$ice and descriptions of the custo#er and the character of the transaction& indiscri#inately referred to as *representations and ackno/ledg#ents of fact+R significantly& 1loster J. brushed off any distinction as to for# and laid do/n a substance-based test by saying: *the fact that so#e state#ents are e8pressed in the language of representation or ackno/ledge#ent cannot K #ake any difference to the analysis /hether the state#ents ga$e rise to a contractual estoppel+. 24. (n "onegal a non-reliance clause /as identical in for# to those considered in 1ri#stead and @atford 7lectronics )/hich& it /ill be re#e#bered& /ere analysed solely in ter#s of e$idential estoppel,. -n atte#pt to #ake a clai# in #isrepresentation in the face of that clause /as rather tersely dis#issed /ith reference to that part of the %udg#ent in 'eekay /hich discussed contractual estoppelR the sa#e decision /as taken in relation to the sa#e type of clause in

Tenson. The ter#s in /hich these t/o cases dealt /ith the #atter #ay create the i#pression that the approach /hich analysed nonreliance clauses in ter#s of e$idential estoppel had been %ettisoned altogether and the approach in Lo/e re$ersed to gi$e rise to a rule that such clauses /ould al/ays raise contractual estoppel. That& ho/e$er& /ould be /ishful thinking in light of the ter#s in /hich 'eekay and Spring/ell /ere decided. Those leading cases follo/ed a #ore cautious approach /hich distinguished bet/een the t/o types of estoppel& carefully laying ground for the recognition of contractual estoppel in its o/n right alongside e$idential estoppel. State#ents need not be tested to see if they raise e$idential estoppel on the e$idence if they already raise contractual estoppel. 9ence the need for a test /hich /ould enable the parties and the courts to deter#ine /hether the ter# in Cuestion raises contractual estoppel and ob$iates inCuiry into e$idence beyond that reCuired to establish a contract. 25. 1loster J. stated in Spring/ell that the principle of freedo# of contract and contractual certainty underlying that type of estoppel /as applicable to *any for# of contractual state#ent+. That& ho/e$er& only begs the Cuestion /hat are the state#ents /hich ha$e that characteristic& gi$en her o/n decision that the for# of state#ent is of no i#portance and in $ie/ of the sur$i$al of the possibility to conclude that *although contained in the sa#e docu#ent as the contract& Ma state#entN is not a contractual pro#ise+. 2A. The principle on /hich all of 'eekay& Spring/ell and Trident /ere e8pressed to be decided /as that the parties /ere free to deter#ine and agree the factual basis for their contract. This principle is readily understandable in the conte8t of co#pro#ise cases on /hich the decision in 'eekay /as pegged by the !ourt of -ppeal--an ackno/ledg#ent of absence of ad$erse possession

rights /as a necessary basis on /hich the landlord could let the property by a tenancy agree#ent /hich co#pro#ised the dispute in S#ith. The principle is also Cuite understandable in the conte8t of Spring/ell and 'eekay itself& since the ter#s there /ere indeed funda#ental to deter#ining the in$est#ent ad$enture relationship in /hich the parties /ere entering and could /ithout e8aggeration be described as creating the factual basis for the contract. - deeper in$estigation is reCuired to establish the application of the principle to the dee#ing pro$ision considered in Trident. 9a$ing held that by the ter#s of that pro$ision the parties agreed the state of affairs to be that no pre-contract #isrepresentations had been #ade& -ikens J. felt it necessary to state that& *#ore i#portantly+& the parties agreed that *this state of affairs is to for# the basis of the transaction+. There /as nothing in the ter#s of the pro$ision itself to suggest that the parties so treated it& nor does it& /hen taken on its o/n& stand out as anything #ore significant than a boilerplate pro$isionR the analysis can ho/e$er be %ustified by the fact that the pro$ision for#ed part of a larger clause /hich pro$ided for the *as is& /here is+ basis of deli$ery of the leased aircraft and had a nu#ber of other pro$isions of si#ilarly funda#ental nature. 23. (t /ould be unfortunate if these decisions /ere interpreted as reCuiring that a ter# by /hich contractual estoppel is sought to be raised has to ha$e a special i#portance in the conte8t of the transaction& so as to gi$e it an attribute of for#ing the *basis+ for it. (f the test of this nature /ere to be adopted& the degree of significance of a ter# in the conte8t of the transaction reCuired to satisfy the test and identification of the *transaction+ itself of /hich the ter# is to be the basis /ill create plentiful opportunity for argu#ent and considerable uncertainty of application. -nalogies /ill be sought across the /hole field of contract la/& and& as is usual& the greater a litigantEs desperation the #ore daring /ill be the

analogies dra/n on his behalf. (n search for certainty& the legal profession #ay be te#pted to borro/ the use of *basis of contract+ clauses fro# the insurance #arket& infected as they are /ith a #ischief deplored by the La/ !o##ission. That #ischief is unlikely to affect non-ackno/ledg#ent clauses specifically but if the concept is transposed into the field of general contractual assurances generally& it #ay #utate to feed on the standard practice of fra#ing such assurances as both representations and /arranties. (f a breach of *ordinary+ /arranty only sounds in da#ages& /hat of a /arranty /hich is ackno/ledged to be part of *basis of contract+V 7fforts /ill need to be taken to o$erco#e the presu#ption that the ackno/ledg#ent is to be construed as intending to #ake the /arranty into a special type of a strict co#pliance ter#. :I. -lso& the *basis of contract+ for#ula itself /ill be e8a#ined closely and it /ill not help that it falls back into the parlance /hich treats representees entering into transactions *on the basis of+ representations #ade to the#. That is too close for co#fort to the concept of induce#ent and reliance and risks losing the distinction the for#ula is supposed to be #aking. :1. - better $ie/ is to treat references to *basis of contract+ in the post-'eekay cases as findings in relation to the factual background against /hich the contracts /ere interpreted to conclude that the rele$ant state#ents /ere contractual ter#s and not #ere representations. Such findings& coupled /ith the duty to gi$e effect to the partiesE freedo# of contract& /ould no doubt ha$e gi$en the %udges greater co#fort in the face of the o$erbearing authority of Lo/e. -fter the /eight of that authority had been shaken off& there is no need to replace it /ith a self-i#posed burden. >n this $ie/& no finding as to *basis+ /as really necessary to the decision in TridentR that decision can be treated as a case of an -spinall-type dee#ing pro$ision. (t is also instructi$e that neither "onegal or Tenson

)cases decided before Spring/ell to /hich 1loster J. #ade reference to support her reading of 'eekay, e$er raised or discussed the need for the rele$ant pro$ision to satisfy a special *basis of contract+ test. (ndeed& in those t/o cases the non-reliance clauses /ere clearly part of standard boilerplate pro$isions )e$en though the agree#ent in "onegal /as a co#pro#ise agree#ent,& and there is nothing in the reports to indicate an in$estigation into /hether they had& or /ere reCuired to ha$e& any sort of special significance /hich the other clauses did not. .or /as there any such in$estigation in relation to the dee#ing pro$isions in -spinall or !a#pbell . That such in$estigation should strictly be unnecessary fits into the doctrinal foundation of estoppel by contract. - contractual ter#& once found to be such& does not reCuire any further support. (n the /ords of an old authority& it is *eCually the basis of agree#ent bet/een the parties+ as any other ter# of that agree#ent. (t binds /ithout #ore& by $irtue #erely of being part of a concluded contract. (f necessary& it can be said that a ter# satisfies the *basis of contract+ test si#ply because the parties thought it /as /orth the trouble of /riting it do/n5R indeed& in the fe/ instances /here the courts used the for#ula its use can be e8plained not so #uch as application of a test but as illustration of the partiesE perception /hy a ter# /as thought necessary to be included in the contract. There is no har# in honouring that sub%ecti$e perceptionR that a ter# #ay in truth be Cuite i##aterial is really of no conseCuence& since as a #atter of proof estoppel is only raised by a state#ent /hich& in an action founded on the contract& establishes or ad#its a fact in issue in that action. :2. There is no need to stretch the la/ of contract to co$er #atters already co$ered by the la/ of e$idence. (f that is the correct approach& then the issue boils do/n to deter#ining /hether the state#ent by /hich contractual estoppel is sought to be raised is

intended to be a /arranty in the sense of agree#ent on the facts or a representation of facts. This is a $ery fa#iliar proble# /hich is o$erlaid by historical authorities. "ri$en by the $ie/ that *it /ould be of $ery dangerous conseCuence to add a con$ersation that passed at the ti#e& as part of the /ritten agree#ent+& the courts originally follo/ed a clear& straightfor/ard rule that such con$ersations /ere #erely collateral representations& for if they had been intended as /arranties& they /ould ha$e been put into the /ritten contract. This approach /as percei$ed as too harsh after the decision in "erry $ 'eek settled the position that relief in da#ages /as not a$ailable for a collateral representation /hich /as not #ade fraudulentlyR thereafter and until the enact#ent of the Misrepresentation -ct 1345 it beca#e a usual tactic to atte#pt recasting an innocent representation as a collateral /arranty and seek da#ages for breach of contract. Lears spent in pursuit of that e8ercise ha$e generated a $ast body of rather confused case la/ on the sub%ect of characterisation of state#ents as representations or /arrantiesR the courts struggled /ith the distinction& /hich pro$ed $ery elusi$e. By the beginning of the 2Ith century& the case la/ on the sub%ect /as so #uddled that the 9ouse of Lords atte#pted to clear the field by going back to principle /hich it found in a restate#ent of the 1Ath-century test that an affir#ation /as a /arranty *pro$ided it appear on the e$idence to be so intended+.5? This rule /as put on a foundation of the policy that *a person is not liable for da#ages for an innocent #isrepresentation& no #atter in /hat /ay or in /hat for# the attack is #ade+. ::. 9o/e$er& the policy /as gradually bent and so /as the application of the principle& cul#inating in a decision of Lord "enning M.R. to the effect that /here a representation /as #ade for the purpose of inducing& and did actually induce& a party to enter into the contract& *that is pri#a facie ground for inferring that it /as

intended a /arranty+ and that it /as for the representor to rebut that inference by sho/ing that he /as *innocent of fault+ in #aking it. That this /as a policy-dri$en approach& Lord "enning openly ad#itted in 7sso 'etroleu# $ Mardon . These days those /ho rely on innocent #isrepresentation ha$e a statutory re#edy under the 1345 -ct and the policy underlying the reasoning is gone. The distinction bet/een representation and /arranty along the line originally dra/n in 9eilbut /as restored after the %udg#ent of the 9ouse of Lords in (ndependent Broadcasting -uthority $ B(!! !onstruction Ltd had definiti$ely re%ected the notion that *any representation K /hich is intended to be acted on and /hich is acted on creates a contractual relationship+. :=. 9o/e$er& a legacy of confusion re#ains. (n a #odern !ourt of -ppeal case of sale by description the basic principle /as for#ulated in this uncontro$ersial /ay: *(f a party to a contract /ishes to clai# relief in respect of #isrepresentation as to a #atter /hich did not constitute a ter# of the contract& his clai# /ill fail unless he is able to sho/ that he relied on this representation in entering the contractR in general& ho/e$er& if a party /ishes to clai# relief in respect of a breach of a ter# of the contract )/hether it be a condition or /arranty, he need pro$e no actual reliance+. :?. 9o/e$er& /hen the court had to decide /hether or not the description /as a ter# of an oral contract& t/o out of three %udges directed the#sel$es on the basis that actual reliance by the purchaser on the description of the article could be taken as e$idence that authenticity of the description /as a ter# of the contract& /hereas absence of such reliance could point to the opposite result. :4. This /hole body of case la/ /as produced by disputes that

in$ariably arose /here there /as an atte#pt to sCueeQe a collateral )in the sense that it /as not part of the /ritten ter#s, state#ent into a /ritten contract. - #odern non-reliance clause& per contra& is in$ariably a state#ent /hich #akes part of the contract )at least in that sense,. (n that conte8t& the distinction bet/een a representation raising e$idential and a /arranty raising contractual estoppel puts in issue substanti$e characterisation of a state#ent /ithin the four corners of a contract. - rather si#ilar e8ercise has been undertaken before in the conte8t of estoppel by deed. Raised by pro$isions in deeds& it /as initially based on the special character of *a sole#n and una#biguous state#ent or engage#ent in a deed+ /hich ad#itted no *contradictory proof+. These days it is treated )or at least is on the /ay to being treated, as an instance of contractual estoppel raised by contract )/hich #ay happen to take the for# of deed,R this approach is consistent /ith old authorities& such as !arpenter $ Buller & /hich held that estoppel /as raised by the partyEs *contract in the instru#ent Munder sealN itself+. !onseCuently& the for# of instru#ent /as not decisi$e: a recital in an instru#ent not under seal could be conclusi$e to the sa#e e8tent as that in an instru#ent under seal& so long as there /as a contract to that effect& and the e8tent of estoppel had to be deter#ined as a #atter of contractual construction. This line of reasoning /as continued in -shpitel $ Bryan /hich held that estoppel could be raised by agree#ent to ad#it certain facts as the basis of the contract and that raising such estoppel did not reCuire a #istake or a #isleading state#ent /hich induced a party to proceed to contract on an erroneous belief. These decisions furnish solid support to post-'eekay counsel and %udges in their struggle against Lo/e to distinguish contractual fro# e$idential estoppel. :5. (n ter#s of application& after early instances of rigid approach the courts had co#e do/n fir#ly in fa$our of looking to the true

intention of the parties in deter#ining the effect of state#ents sought to be raised as estoppel. (t /as a Cuestion of construction& decided on the basis of the partiesE intention& as to /hether a state#ent /as intended to be binding at all& and if so& in /hat #anner. -s part of the search for the true #eaning of the parties& the old la/ de$eloped and e8plored a distinction that is apposite in the conte8t of the #odern characterisation proble#. (t is a distinction bet/een a state#ent in the nature of a #utual agree#ent to ad#it facts as true& /hich binds all the parties& and a state#ent #ade by %ust one party by /hich he only is bound. Stroughill pronounced the distinction& together /ith the principle that it /as to be applied as a #atter of contractual intentionR the general state#ents /ere illu#inated by obser$ations #ade by %udges in the course of argu#ent on their application to the facts. 7rle J. distinguished bet/een a recital by one party of facts /ithin the kno/ledge of that party /hich induces the other to enter into a contract of the faith of it and estops the first party only& and a recital /hich constitutes the language of both parties and estops both. This sho/s that although a contractual agree#ent does not ha$e to rely for its estoppel effect on #atters of induce#ent and reliance& those #atters #ay ne$ertheless #ake a co#eback as part of the characterisation e8ercise. :A. -pplication of statutory controls -s a result of the recent cases contractual estoppel has been plucked fro# relati$e obscurity and /ill no longer be relegated& as it /as at the ti#e of !olchester B! $ S#ith& to the position of a curious rarity. (ncreasing reliance on contractual estoppel /ill drag it onto the battlefield that is the debate on li#its to e8clusion of liability in #isrepresentation. The debate is no/here near co#pletion. 7$en as the recent cases unani#ously accepted the effect of non-reliance and other *basis of contract+ clauses in ter#s

of raising contractual estoppel& there /as no agree#ent on the issue of applicability of the 6nfair !ontract Ter#s -ct 1355 and s.: of the Misrepresentation -ct 1345 to those clauses. (n Spring/ell the %udge used the fa#iliar distinction bet/een e8e#ption clauses and clauses pre$enting liability fro# arising and held& in$oking her *basis of contract+ analysis& that *ter#s /hich si#ply define the basis on /hich ser$ices shall be rendered and confir# the basis upon /hich the parties are transacting business+ /ere outside the scope of the legislation. (n Trident a clause /hich /as analysed in e8actly the sa#e ter#s and /as gi$en effect as an arrange#ent for#ing the basis of the agree#ent& /as held ne$ertheless to be sub%ect to the statutory controls. :3. (t /as recently %udicially recognised that the authorities are in a state of tension. - school of thought /hich holds that it is not an e8clusion of liability for #isrepresentation for the purposes of the statute for the parties to agree that none had been #ade or relied upon rubs up against the $ie/ /hich seeks to apply the statute to any for# of /ords /hich has the substanti$e effect of e8cluding liability )including by /ay of pre$enting it fro# arising,. @atford 7lectronics encapsulated the tension. The %udge belo/ held a nonreliance clause *in substance+ an e8clusion clause caught by s.: of the Misrepresentation -ct& only to be told by the !ourt of -ppeal that it /ould be *biQarre+ to i#pute to the parties an intention to e8clude liability /here they belie$ed )as sho/n by the non-reliance clause,& that none could e$er arise. (t /as suggested& as part of co##ent and analysis in these pages& that the *substance+ test is to be preferred and that #atters of co##ercial certainty and allocation of risk are to be considered as part of the test of reasonableness. The argu#ent goes that ter#s agreed bet/een parties of eCual bargaining strength should nor#ally sur$i$e the application of the reasonableness test /hereas the non-application

of the test )/hich is the conseCuence of re%ection of the proposed *substance+ approach, /ill depri$e the courts of any chance to protect the $ulnerable fro# the use of unreasonable clauses. The conclusion is that the courts should take the po/er to apply the statutory test to any clause or ter# /hich *in substance+ is an e8clusionary ter#. =I. This $ie/ /ill gain further ground no/ that protecti$e barriers erected by Lo/e %urisprudence in the /ay of non-reliance clauses ha$e been torn do/n. 're$iously& e$en though a non-reliance clause #ight ha$e been considered out /ith the statutory controls it /as ne$ertheless sub%ect to the tall order reCuire#ents for e$idential estoppel& /hich of the#sel$es /ould contribute to the protection of the $ulnerable party& as happened in Lo/e. @here a non-reliance clause raises contractual estoppel& those reCuire#ents do not apply and the case for not allo/ing legislati$e protection to be defeated by percei$ed technicalities /ill be #uch stronger& lest the /eaker party is left /ith no protection at all. There is little cause for concern at this de$elop#ent. True enough& co##ercial parties shun the test of reasonablenessR they see it as an intrusion /hich #ilitates against co##ercial certainty of contracts and is generally offensi$e to the senti#ents of co##ercial #en /ho kno/ their business and agree to allocate risks and re/ards bet/een the#sel$es on the basis of business considerations. Let it /ill be noted that the courts ha$e al/ays been assessing the relati$e strength of the partiesE bargaining positions before they got )if they e$er did, to the application of the reasonableness test. Such assess#ent has beco#e a sort of a prior test& a test /hich deter#ines the applicability of the statutory test of reasonableness. Shortly after the enact#ent of the 6nfair !ontract Ter#s -ct 1355 the attitude of the courts /as e8pressed in the 9ouse of Lords as follo/s:

*it is significant that 'arlia#ent has refrained fro# legislating o$er the /hole field of contract. -fter this -ct& in co##ercial #atters generally& /hen the parties are not of uneCual bargaining po/er& and /hen risks are nor#ally borne by insurance& not only is the case for %udicial inter$ention unde#onstrated& but there is e$erything to be said& and this see#s to ha$e been 'arlia#entEs intention& for lea$ing the parties free to apportion the risks as they think fit and for respecting their decisions.+ =1. 1loster J. follo/ed this in%unction in Spring/ell /hen she said that her conclusion that *basis of contract+ ter#s /ere to be outside the legislation /as correct because other/ise *e$ery contract /hich contains contractual ter#s defining the e8tent of each partyEs obligations status of /ould the ha$e to satisfy e8a#ining the the reCuire#ent ter#s of of their reasonableness+. The courts are clearly looking at the Cuality and parties before relationship. (f satisfied that the parties can pro$ide for the#sel$es& the courts /ill not interfere. .o one could plausibly argue that the co##ercially astute in$estor in Spring/ell needed the statutory protection of the 6nfair !ontract Ter#s -ct si#ply because he /as dealing on the standard ter#s of an in$est#ent bank. The courts are /ell capable of recognising on the facts /here the statutory protections are %ustified& based on the substance of relationship of the parties. The conte8t of such relationship is ne$er o$erlooked& on the contrary it can be said that e$ery effort is taken to recognise it. The decision in Lo/e /as put on the basis that the principle of freedo# of contract could only apply sub%ect to the underlying assu#ption that the parties /ere of eCual bargaining po/er. (t /as because that assu#ption did not hold true& and the /eaker party needed protection& that "iplock J. relegated the ackno/ledg#ents to the status of representationsR this happened e$en as Lord "enning M.R. /as busy *ele$ating+ representations to the status of

/arranties for the sa#e reasons. The courts /ill gi$e protection to the $ulnerable but they /ill do so on the #erits of indi$idual cases. =2. The decision in Binder $ -lachouQos is a good e8a#ple. @hen resisting the enforce#ent of a co#pro#ise agree#ent the ter#s of /hich estopped the borro/er fro# denying the agreed fact that the lender /as not a #oneylender& counsel sub#itted unsuccessfully that if estoppel /ere to be raised& it /ould beco#e possible for a #oneylender to #ake it a ter# of each of his transactions that the custo#er accepted that he /as not a #oneylender and thereby to e$ade the statutory controls. The court /as uni#pressed since it /as concerned /ith a co#pro#ise agree#ent #ade bet/een t/o indi$iduals )/ith the alleged #oneylender $ery patently not being a professional #oneylender,& #ade /ith the benefit of counselEs ad$ice. There can be no serious suggestion that this decision /as lea$e for professional #oneylending organisations to use the for# of clause counsel had referred to in argu#ent. =:. (t therefore appears that the courts ha$e in fact been for so#e ti#e applying a substance test by looking& in each indi$idual case& at the relationship and the relati$e status and situation of the parties before considering the for# of /ords used by the#. That test deter#ines /hether statutory controls /ill be allo/ed to ha$e application to the ter#s of a specific contract. The courts do not assu#e %urisdiction to re$ie/ the ter#s of any contract. They only take %urisdiction to do so to the e8tent such re$ie/ is /arranted by the character of the partiesE relationship. @here that is the case& there is unlikely to be a strong ob%ection that the %urisdiction should e8tend to contractual non-reliance clauses /hich #ay arguably fall outside the technical statutory description of controlled pro$isions.